Where We Are in the Current Real Estate Cycle- and What It Means

Real estate has been in the news just about every day as housing prices have "fallen". There are all kinds of opinions about what's going on and where this is all heading. But these opinions are just guesses and do not take every piece of the puzzle into consideration. History has shown us that the economy goes up and down all the time, and real estate has long coincided with these fluctuations. Economic cycles of all kinds (stock, macroeconomic trends, housing, etc.) are known for a tendency towards extremes and that market corrections have a way of over-reacting which is exactly what we are seeing today in the real estate market.

So where are we in the current real estate cycle? Is waiting to buy a brand new home a safe option? These are very valid questions that require credible answers in order for home buyers today to achieve the confidence that the future can and will be better than the past.

First, don't panic over newspaper headlines. Make an informed decision. Run your own numbers. For most buyers, there is no real need to wait for the market as a whole to officially adjust out. The bottom of the market is not a date, but a band of time or season, and therefore what constitutes the bottom for the entire country is meaningless for those looking to buy and sell homes in their own communities. If you sit on the fence and wait for the absolute best deal, you could end up literally waiting for years. And most likely, your guess on market timing would be wrong. But if you choose to buy now, you will not only be in the driver's seat during the buying process, you will also reap the gains of price appreciation once you become a home owner.

Waiting for the right time to buy puts you at risk of missing it and getting caught in a market on the upswing. Plus, for some first-time buyers, owning simply makes better economic sense than renting. In some areas in the Twin Cities, rents are getting close or surpassing a mortgage payment. And you don't receive any tax benefits from paying rent, nor do you accumulate any price appreciation, as you would if you owned a home of your own.

Next, realize there are always some people who need to move because of job relocations, expanding families, or a desire for better schools. In sought after neighborhoods, there's a price to pay for waiting. You have to ask yourself, "If the price goes down much more, I'll have other people trying to buy it, even if it's not the absolute bottom of the market." In the end, you might erase the savings you thought you had achieved by waiting.

My advice to buyers is simple, Live in the right home. There's no reason to compromise in buying the home that is right for you. Make a priority list of things that are ‘must-have' versus ‘nice to have' versus ‘not important.' Write it all down and use this as a checklist to unlock the reasons about the home you're searching for, where you want to live, and what it will take to get you there.