Frankly, the #1 questions I get are market timing questions like: "Have we hit bottom?" and "Is NOW the time to buy?" Well, after months of thinking and market analysis I've discovered the EXACT time you should buy, down to the DAY!
So you no longer believe the "Buy Now!" campaign from the National Association of Realtors. Especially since The New York Times quotes the former Chief Economist David Lereah as acknowledging he had gotten it wrong. Also you no longer hear the office water cooler chat: "Historically with a 7% annual appreciation, you can't go wrong" or "stop throwing money out the window" (see my "Don't Buy, Ask Why" video/blog).
The market has been dropping over the last two years. Poorly, I mean "badly" (especially condos). In the newish building where I live (Clarendon 1021, an Arlington Condo in Virginia), one particular unit went from $585,000 starting price, up to $670,000, and then down to $530,000 in a pre-foreclosure last month. A lugubrious $140,000 swing! So it would make sense that people would ask me "is this the bottom, should I buy now?" and t
oday's "So there are some real deals out there?"
I can understand the fear that a prospective home buyer has in this marketplace. Nobody wants to be made the fool that bought at the top. Even knowing that they got the place for $50k or $100k better than a topper (a made up word for somebody that bought at the top), isn't good enough. They want the exact inflection point. They want to be the braggart of the officeplace in a year or two when they are "rich."
I call these people Market Timers.
Enough already? When EXACTLY is the right time to buy...?
The day, as in the exact day is... the day you stop caring about the bottom of the market and you decide you are ready to live in a place for 5-10+ years and enjoy life.
I'm serious. It might sound like a convenient way for yet another Realtor to make "now" always the best time to buy, but show me one other blog that will also tell you that the economics of buying are still WAY off, and might be for many years to come. The economics of renting are still far far better than buying, even after the tax advantages.
I've always maintained that your house should be #1 about enjoying life and all the "warm and fuzzies" that come with home ownership, and maybe #4 can be about investment. Those that try to make them both #1 will have an anal
ysis paralysis situation.
Nobody knows what the market will do (see Stockbrokers Can't Predict Stocks, Realtors Can't Either!), so quit trying to be Nostradamus (or expecting me to be one), and go out there (when YOU are ready) and try and get the best price possible and enjoy!
My next article will be about Pre-foreclosures, short sales and bank owned properties. If you like what you are hearing, make sure you sign up for this blog via Feedblitz on the right side.
- Written by Frank Borges LL0SA- Broker FranklyRealty.com
p.s. Typos, please report them to me.
p.s.s. For those that really wanted some "timing," all I can say is December is when there are the fewest # of buyers, and you might get another 1-3% off. Come Jan 2nd there is a FLOOD** of new buyers that have put the holiday stresses behind them, and are eager to buy. The problem with waiting until Dec is the inventory and your options are the lowest.
Correction: A commenter called me out on the use of "FLOOD", that was probably too strong of a word. I ran the numbers and actually January had 40% more under contracts than November and only 20% more than December for 22201. So maybe I should have said a "smidgen more." See comments for more details.
30 COMMENTS SO FAR. ADD YOUR COMMENTS.:
Love it Frank! I have a post started about this very issue. Remember when folks bought a home to live in and enjoy? Was it really only a few years ago............and now every one is asking is it time.
Frank I couldn't have said it better, we can't predict what will happen, even the weatherman gets it wrong lots of time. If you need a place to live and renting is not an option go for it.
Hey Frank, I really enjoyed this blog and it was very well written as well as "right on" on several points.
Frankly I gave this a high five and a feature flag Frank. You said what needed to be said in a humorous but to the point and very honest way! I like that!
Jeez Frank,
I've only been saying this for about 20 years. I have to give credit where's credit's due, you beat me to the punch. I just hope more folks will stop running around like Chicken Little.
As far as hitting bottom, nobody know where bottom is until we've come up on the other side and we're looking back down at it. Waiting for the bottom is like driving in reverse. You may eventually get where you want to go but it's a pain in the neck!
Thank you for all your comments.
I really do feel bad for those that are ultra stressed about timing the market. Some of them are even leftover from 2002 when they thought prices were way too high and they were waiting for a tanking (they would be $100k richer, even after the pullback).
If somebody wants to find the bottom, I tell them that they aren't ready yet, and may never be.
I also am planning an article on low-balling and how it sounds sexy, but it doesn't really exist/work in my opinion. Agents will work with those lowballing clients, because they figure "They will get tired, they just need to get a couple lowballs out of their system." That dishonesty doesn't help the client.
Susan, love the driving backwards comment.
Frank, I have a few buyers who are in "wait mode". No one can predict the market and by the time it starts to go up, those buyers will have missed out. If they need a home, buy now. If not rent. In my transient community a college town, we use to appreciate 8% per year historically. We plateued in 2001, in 2002, 2003, 2004, 2005 we barely kept up with inflation. In 2006 and 2007 so far we have gone down. Big time.
It is a great time to buy. Sellers not so good.
Securities brokers have always had the right response to this type of investor. They say "don't try to call market tops or bottoms..buy value and hold on for the long term". We in the real estate industry could learn from that simple response.
I always thought it was always a good time to buy, but not always a good time to sell.
In the stock market they say you can recognize a bottom when it is the topic of conversation on everyone's lips. When it is headline news every day. I wonder if there is a correlation between the stock market and the real estate market?
Great article, Frank. There are always going to be folks who was to beat the market in one way or another, so the question about when to buy is always there, and there is never a right answer for them. The long term value is, for most, the best reason, adn there are always good deals that will allow for that.
Jeff
fantastic article Frank! One of the best I have read in a really long time!
Great post! It wasn't that long ago that people bought homes to live in, raise their families, and build memories. How'd we get so far from that so fast?
Well said.
The market changes constantly and as soon as buyers and seller's realize that they drive and set the market the sooner we will all have a more stable market. Seller's need to come down in price and buyers have to make reasonable offers.
My market has not hit bottom yet I think by summer it may start to stablize
That David Lereah is a putz. Completely ruined the credibility of NAR (not that it was even relevant at the time)!
Good one Frank, I had to tell a client today that if he wansn't ready to stay in one place for at least 5 years he should hold off.
Good post Frank............Look forward to the next one.
Duane Hosek in the Black Hills of South Dakota
agree with Robert Kerr. Are you saying now is the time to buy because you want a commission check in a month? Try to look at the long term repercussions and how it will benefit you, as a REALTOR. Client "A" takes your advice and gets a "good" deal in today's market. Client "B" decides it's more prudent to wait, and buys for 20-30% less than Client "A". Five years elapse and Client A is back at Square One -- unable to move up, bacause they have no equity - their home continued to decline in value and now has recovered to the price they originally paid. On the other hand, Client B has realized a substantial gain and CALLS YOU BACK to LIST THEIR HOME and HELP THEM BUY ANOTHER. Oh, gee -- maybe it is better to wait... Let's see -- do I want to aerve my client's needs or my own? Are we in it for a year or a career? You know your own market -- I hope you know your conscience.
As a buyer's agent I am seeing some great buying opportunities and I know they won't be here for ever.
Good post. Thanks for sharing.
GREAT post! I've missed your posts recently but this one reminds me why I love reading them.
So many buyers read the news and focus too much on the investment aspect when they truly want to buy a home. When I work with buyers I try to ascertain very early one which type of buyer they are: investor or homeowner.
Thanks for getting our attention and reminding us!
Bravo Frank!
Loved your post. Couldn't have said it any better. I'd love to share this with some of my Buyers who just can't seem to pull the trigger - always looking for the best deal. They really need to start thinking about what really makes a home a home. It's more than just where you sleep at night – it’s where you renew emotionally – where you find balance. A home isn’t a home unless it nourishes the soul not just your pocket!
D
THANK YOU!! That's the question I get most often from both the realtor and lending sides. When is the best time to buy? I've always said there isn't a specific answer and it's situational, you've put it another way that seems to help take the stress off. Great post!
- Tchaka
Flood of buyers after Jan. 1st? I love the sound of broker flacks whistling in the dark.
Dear notabrokerthankheavens,
You got me!
That probably wasn't the best choice of words.
What I meant was December is fairly dead since everyone is stressing over the holidays and right after the first I have experienced many more buyers, or at least lookers (ie Open houses and places going under contract.)
So I thought I'd be all smart and go back and run some actual numbers for Dec vs Jan. To my dismay the initial results showed only a 10% difference. But then I realized that Realtors put their new construction and FSBO sales from earlier in the year in Dec (so the deals can count toward their annual sales figures.)
Anyhow, I reran the numbers for 22201 and found 29 places going under contract (not solds, but under contracts) in November, 35 in Dec and 42 in Jan.
So one could use % and say Nov vs Jan is a 40% and Dec vs Jan is 20%.
So at least this data suggests that NOVEMBER is the slowest month.
But you are right, to say a flooding is an overstatement, I'll go fix it.
Well said!
Frank,
Good stuff here. Buyers need to realize that getting a great deal and getting a great place to live may not always co-exist. It is a ggod time to find "values" in our market, but I agree a "home" should come first!
Hey there Frank, from just across the river. Thanks again for a great write-up. I'm sure all of us are quite sick of the low-ball offers and buyers who keep asking the question you so eloquently answered.
I hope you get as good a laugh as I did yesterday....I have a property on the market now for $695k, reduced from $850k, that was once ratified for $810k but couldnt go to settlement because my client, who also happens to be my traffic ticket attorney (dont ask) never filed the estate when his parents passed. We lost the contract.
Now we are $150k+ under the original asking price and I get a call from another agent who says her daughter has been looking at our listing for quite a while now and she thinks she is ready to write. So I asked what the general terms were and her response was "...Four Hundred Seventy Five Thousand..." I couldnt believe that another realtor had the audacity to ask me that about her family member. Am I crazy?
Keep up the good blogging.
OK, so the best day is the day I decide to stop worrying and take on $100,000-200,000 in debt for 2-30 years that I could have avoided if I had just waited a few months?
So, your point is that $100,000 in debt magically disappears over the course of five years? Or that buyers should just suck it up and pay $1000 a month extra on upside down mortgages so that their Realtors (TM) can collect a nice commission?
Every time I think I've heard the worst line from a Realtor (TM), someone steps up with something even sleazier.
Hey Anonymous,
Have you read any of this blog, besides this post?
If you really think that homes are going to drop $100,000 in a "few months" then this blog is exactly right, then you should NOT BUY.
And if you are right, and it DOES drop $100k in a few months, guess what... you STILL won't buy, because you will think it will drop more.
Again, if you are trying to time the market, I don't suggest buying, ever.
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