Purchasing
- Your first home
- Your next home and move
- An investment property
- A vacation home
Refinancing
- To tap your home equity
- To save money
- To avoid rate increases
- To lower monthly payments
Home Equity
- Loans and lines of credit
- Finance major expenses
- Consolidate Debt
- Invest
Too soon to buy in the current market?
By Justin Hunter
The current real
estate market has produced more
questions than answers. How long will
the slide last? How far will sales,
prices fall?
The market was fairly easy to predict
from around 2001 to most of 2005. You
knew that prices and sales were going
to increase so that if you planned on
buying you should do it as son as possible
because there was no end in sight for
the inflation.
Well, it did end, and now no one knows
what to expect from the falling market.
Yes, sales are hitting record declines
and prices have started to fall, but
does this mean that if you are a buyer
you should what for better prices, or
is this the best market for a buyer,
right now?
Columnist, June Fletcher, attempts to
answer this million dollar question
in her article, “Buy a Newly Built
Home Now Or Wait for Prices to Fall
Some More?” which was posted October
9, 2006 on realestatejournal.com.
Fletcher refers to a question posed
by one of her readers: “I am purchasing
a new home just outside Los Angeles.
But like everyone else, I am worried
the bubble will pop. I reserved the
house in February of this year, so the
house has gained $20,000 just on the
base price, but I added options that
brought the house's price and value
up. Should I get out of the house and
wait for the market in this area to
fall, or am I safe with the current
market?”
The problem with these types of real
estate questions is that you want to
provide an answer that will lead the
buyer to the safest possible solution,
but that is impossible because you can
never actually predict the future market;
only stipulate. Interest rates, job
growth, housing supply, household
growth and other pertinent factors greatly
contribute to the rise and fall of the
real estate market.
“According to DataQuick, a market
research firm that's a subsidiary of
Vancouver-based MacDonald Dettwiler
and Associates, home sales in Southern
California are growing at their slowest
monthly pace in nearly nine years --
the total of 25,628 sales in August
were down 23.5% from the same month
a year earlier. And prices are up only
2.7% from the same month a year before,
to a median of $489,000. Foreclosures
in Southern California for the second
quarter rose 67.2% from a year before,
the highest year-over-year increase
since DataQuick began tracking defaults
in 1992.”
As bad as the statistics read, it may
still be a good time to buy. DataQuick's
president, Marshall Prentice, recently
released a report stating median home
prices had doubled during the last four
plus years.
“Similarly, a report by Harvard
University's Joint Center for Housing
Studies notes that sharp declines of
5% or more seldom occur in the absence
of severe overbuilding, dramatic employment
losses or a combination of the two.”
So, you have to consider and balance
the risk of the property’s price
and interest rates. You can never predict
when a price has hit rock bottom. It
is simply a test of guts. Do you think
the home price will keep falling or
did you already miss that cut and have
to buy at a higher price or at a declining
value?
“Still, keep an eye out for ads
for your project, to see if the builder
is offering any new buyer incentives,
like buydowns on mortgage interest rates
or free finished basements.”
If you receive a good deal, included
with some of these additional incentives,
it really doesn’t matter if the
price drops a couple of thousand dollars;
you should purchase the property.