It's a Good Time to Buy

It's true, there are a lot of people, potential home buyers, out waiting for the market to bottom out. Of course, the only way to know a market has hit bottom is to look back from the other side when it is headed back up. And, well, then they have missed it. To avoid this situation, we look at indicators. And the indicators are telling us we are near if not there. The indicators are economic stability and strength of the region, inventory, interest rates and market activity.

Let's start with interest rates. After another drop this week to an average of 6.14%, rates are at the lowest level since January and very near the 40 year low we experienced in 2005. Frank Nothaft, chief economist at Freddie Mac said these rates "should help spur a rebound in housing". That said, he also stated that he expects them to reach near 7% by spring.

Inventories remain strong, while seeing some declining numbers, and offer buyers strong choices and affording time to shop and consider. The current inventory, time of year (winter) and increased days on market give buyers increased negotiating power on price, contingencies, closing cost help and other incentives. Many sellers are offering a variety of incentives. That may not last.

If buyers have been, as we expect is true, waiting on the sidelines to re-enter the market, there will then be a great influx of buyers in the coming months when the message gets out, as it is beginning to, that the market is more in balance. Buyers may, therefore, loose some of the advantages they now enjoy.

Where the trouble in the market has been is in sales volume, not prices or property values. There was a recent national report of a 1.2% decline in median price of single-family homes in the 3rd quarter of 2006 over 2005 for the same time period. What this overall number didn't tell us is that of the 148 metropolitan markets, 102 of them increased, and only 45 decreased. So, in 69% of local markets where median prices changed year to year, the direction was up. Keep in mind, however, that regional markets and even sub-markets therein have shown decreases. That is certainly true in some sub-markets in our region.

The overall message, however, is that the market changed from a supply side but not the demand side. Meaning, people have the means to buy (jobs, good wages, low rates), they just want a better value and a stronger position at the table. Sales volumes are down, but the economic status of our region continues to be strong and the number of households is expected to continue to increase. So we have more reasonable housing prices, historic low interest rates, a continued and likely increased demand for housing in our area, the third strongest real estate market in history. That combined with housing to choose from and reasonable negotiating power tells us it is a good time to buy a home in the Washington Metropolitan Area.