Should I buy a house now?
Here we are, me and my clients, looking at a brand new listing with a pool that's priced as if it was 2005, not 2007, when the question comes up again: "Should I buy a house now?"
Normally, client and Realtor don't discuss things so elementary. After all, we are LOOKING AT HOUSES. So I guess as a Realtor I should say, emphatically YES! But this is a former client who moved away in 2006 and moved back in 2007, in which case the question and his trust in me make perfect sense.
In fact, it's the question on most buyers' minds.
The answer is, to paraphrase Dave Liniger, co-founder and chairman of the board of RE/Max International: It depends.
It's a question Liniger said his own sons have asked. If you are looking to buy and plan to stay in the home a while, if you have good reasons to move, then buy a house now, he told them. If you are looking to flip a house, it's not a good time.
But this leads to the broader question: Can you, Mr. and Mrs. Buyer, time the market? If you or anyone else could, you would be King and Queen of The World.
In my opinion, you make the best decision you can with the best information you can gather. Then you don't look back.
Whether you buy or not depends on your situation and the house in question.
For my clients looking at the house with the pool, I told them to wait a couple of months because:
- They are in a comfortable rental.
- The house had just come on the market and in all likelihood the sellers wouldn't entertain a 2007 offer if they were living with a 2005 list price. For these buyers, it wouldn't hurt to watch and see if the price went down or the sellers tired of showing it and were amenable to a lower offer.
Here are the pros and cons to buying a house in today's market:
- Low interest rates: There seems to be a palpable hesitancy on the part of buyers in the under $200,000 price range to see what their buying power is. Do not be afraid. The mortgage guy isn't going to eat you alive. Just apply and see what they will do. And don't' be discouraged if the big corporate mortgage company turns you down; they've got their own problems. Just get a second opinion from a local mortgage broker.
- Plenty to choose from: If you're actively looking at houses, you may notice that you are having a problem deciding on which house you like best. There's actually too much to choose from.
- Deals: Yes, there are some deals out there with foreclosures, estates and the like. Again, it's not a good time to flip a house, but it's not a bad time to invest and hold on to it. (See my Best Buy page)
- Incentives: Some local builders are offering their new construction at $100 a square foot and they are offering to pay closing costs on top of that.
- Flexible terms: Existing home sellers are often trying to match the incentives of the builders: closing costs, appliances that stay, etc.
- Will prices continue to drop? On the Eastern Shore of Mobile Bay, prices have not yet dropped across the board and were still appreciating at 1% last quarter. Frankly, if you believe you are going to be in the house a year or so, you may be best advised not to buy, as the cost of selling might be too great (unless you have a relo package).
- Will interest rates continue to drop? Interest rates have remained steady between 5.875% and 6.25% for over a year. I don't think anyone really knows whether the rate will drop around 5.5%. Just a gut feeling, but I doubt it. (Lots of people would say that's how we got into this market in the first place.)
- Will insurance rates drop? There are rumblings -- totally unsubstantiated rumors -- that homeowners insurance availability will loosen up and rates may actually go down. I believe that availability will increase, but I doubt rates will decrease and can find no evidence that the benevolent insurance companies will give us a gift. I do believe that we will get used to this over time and simply stomach it as the price we pay for owning a house.
I didn't notice this until I started making the list, but ...
The reasons that it is a good time to buy are all factually based.
The reasons not to buy, are all hypotheticals.