Do you see a pattern here? All of the real estate professionals are going to tell you now is the time to buy. They were all saying the same thing 6 mos ago. That's OK. Their job is to help the market move houses regardless of the economic conditions and that is an integral part of the housing market.
I would advise talking to buyers and, more importantly, sellers to gauge what is going on in the neighborhoods you are interested in. The real estate pros on this site all know that prices are going to continue to decline in the near term in SF on average (and yes there are a few select areas excepted from that) but most of them aren't going to proactively talk about that because they know that it just helps potential buyers (like me) do what most of us are doing:
watching, waiting, looking to see how much farther down it goes
Anyone who intends to keep their property long enough need not worry about fluctuations from year to year. Provided you can afford your payments and never have to move or divest, I sincerely believe timing doesn't matter much.
I think your 1-2 year recovery plan is a bit optimistic, however, given that i do not believe the foreclosure rate is going to let up anytime soon. The attached graph illustrates that we are currently between the subprime and option arm mortgage "waves". While I agree things look to be stabilizing now, I feel it would be foolish to act in opposition to information like this.
Well, it very well might be true that the market has another 5-10% to drop. We have started to see moderate stabilization, but no none can really predict the future in housing and whether we will ever see significant price appreciation again.
However, those same financial experts who agree that we are 1-2 years away from a bottom also predict that long term we are looking at significant inflation levels which should in turn lead to higher interest rates.
If you have a 700k loan now at 5% interest then you are paying a monthly mortgage of $3757. If you have a lower loan amount of 650k because of price depreciation, but are paying 6% interest then your monthly payment is $3857.
This combined with the fact that there are federal and state tax breaks for buying show that this could very well be one of the best times ever to buy.
If you wait for a couple of years, you will be paying the rent (for a house, $3000/month easily), that's $72,000 out of pocket for two years, and no tax deduction. How much will the house you are interested in buying have to drop to meet that?
Numbers can be interpreted in many years. One good example is the foreclosure rate in Marin. The headline is that foreclosure rate doubled in Marin from last year. The reality is we used to have 102 foreclosure a week, now it's 2-3 foreclosure a week. 100% but only one more house So, the effect from foreclosure will not be as much. ..
I would not wait if I can afford it. Just make sure you buy the best house your money can buy in the best location. You will also be able to put money into the house to fix or decorate it the way YOU wanted to and see the value appreciates due to both the outside influence and the efforts you have put in.
I can tell you that in the short term, there aren't a lot of catalysts that'll drive prices higher quickly, so you have the opportunity to wait till you find the perfect place. But it sounds like you might have found that place already.
So if you have the right place for you, and it's a place you can afford, are you really going to try to "time the market"? Maybe in a few years, the market has dropped, but your favorite place is gone? What then? Will you be happier?
By definition, we are in a Buyers market now. Will it be a better Buyers market in six months or a year? It quite possibly could be. Keep in mind, there are quite a few buyers out there waiting for that perfect moment to get back into the market. When the crowd has decided the right time has come you will find yourself competing for, and possibly losing that great home you really wanted.
As a buyer now you can have comfort in knowing you are buying at a time when the buyers have the upper hand. My advice is get out there, shop around, a grab that dream home you have always wanted! Then when the market has definitively bottomed out and the buyer crowd is competing to be the highest bidder, you can sit back and enjoy that fact that you've already got yours.
Talk with your Realtor and discuss what you want to buy. If you plan on selling in the next five years I believe that a single family home will show a better appreciation then condos because of the increase in inventory in condos that is going to happen over that time period.
If you want me to send you the article I referenced let me know. I have it as a pdf on my desktop.