BOTTOM OF THE REAL ESTATE MARKET? JUST WHAT IS MEANT BY THE "BOTTOM"?? DEPENDS ON WHO'S ASKING!

THERE IS NO SUCH THING AS A "MARKET BOTTOM" in the real estate industry.

BOTTOM has many applications:

• End of price declines?
• End of the viable inventory?
• End of available financing?

End of the . . . . . . what?? 

End of the agent's patience???  Perhaps. 

Or, could be the end of the prospective home buyer's hope when he realizes that, while he was waiting for an announcement or the bottom of prices for his market area, they have already ratcheted up 5%. 

WHAT IS THE BUYER'S MOTIVATION TO BUY A PIECE OF REAL ESTATE?  If the buyer is seeking a home in which to live, I am of the opinion that folks who say that they are watching for the "bottom" are not serious home buyers.   Folks who are more interested in the "deal" than finding a home in which they are comfortable and that suits their family needs, will probably not be ready when prices hit the lowest and stay there for any length of time.

HISTORY DOESN'T SUPPORT "BUYING AT THE BOTTOM".   We can research SOLD statistics over many years in many locations in our market and, while we can identify the approximate time the market began to increase in price and volume sufficient to see the trend, there is no distinct uptick in the number of sales concurrent with the period prices were at their lowest. 

PROCRASTINATION CAN BE COSTLY.  Price and volume almost always trend upward concurrently.  Watch the new home builders.  When a builder sells 2-3 lots in a community, UP GO THE PRICES!  When new home buyers find a lot and a floor plan that they like, if they hesitate or procrastinate, they may go into the builder to select a lot and floor plan only to find that the builder sold 3 homes the previous month and raised the base prices by 2-3%. 

Builders have ways of maximizing profits while maintaining their "advertised based price".  Don't be fooled.  Rely on an experienced agent who knows how new home builders market their homes. 

PROCRASTINATION IN RESALES CAN BE JUST AS COSTLY!  You may have waited for months, watching the price/volume trends for the area and price range in which you wish to buy a home.  AT LAST, you feel comfortable that the market BOTTOM is here.  BUT WAIT!   The economic news reports that the economy grew by a healthy 3% last month.  What happens now??  Interest rates are likely to rise rather rapidly.  While you're waiting for the bottom of the real estate market, interest rates have increased a full percentage point.  Any saving in price you may have gained by waiting is wiped out by the increased monthly payment with the higher interest rate.  

BUY WHEN YOU NEED A HOME.  While you're waiting for the market to continue to fall, they may have already risen. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

This post inspired by John Mulkey,  Forget Looking for a Housing Bottom

 

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