Whether it's listening to idle coffeehouse chatter or talking with prospective buyers, I hear a lot of talk lately about how the real estate market has not yet reached reached the bottom of the current declining cycle we are experiencing. I've had a few prospective buyers go so far as to say "I'm not buying until the market bottoms out!"
I always get a bit of a laugh out of comments like these. I usually follow them up by asking the person how they knew we were at the top of the market 5 or 6 years ago before we started to see the decline we are now in. They generally give me a puzzled look in return, which prompts me to say that I just assumed they knew when the market peaked since they apparently will know when it will bottom out.
The truth is there are no magical formulas or definitive statistics that can emphatically delare the bottom of the decline. Whether it's the stock market or the housing market, we generally don't know a market has peaked until we are clearly in a decline, and we don't know it's bottomed out until we are in full recovery.
I've talked to more than 1 prospective buyer in the past month that is ready, willing and able to buy a home, but is hesitant to do so for fear the value of the home will decline further after they purchase. They are worried that they will miss out on the opportunity to purchase the home even cheaper if values continue to drop. It's a valid concern in this market. But absent a clear cut bottoming of the market, when will you know when you buy? And furthermore, are you paying attention to the other factors that affect your ability to buy a home? What if the current spending and stimulus proposals put forth by the government lead to an inflationary affect on the economy and cause a jump in interest rates...do you know what a simple rate increase will do to your purchasing power as a buyer?
Lets put investors aside and focus on the typical home buyer purchasing a house for the purpose of a primary residence for his/her family. Sure you want to get the best deal possible on the house and you do not want to overpay. My opinion is the 'Quality of Life' factor should trump market timing. You're not just buying a house, you're buying your family's home. Factors like the home's proximity to work, family, church, etc., or the school district your children will attend, or the environment you will raise your children in are of critical importance to the happiness and well-being of you and your family. Regardless of what you pay for a home, will you be happy if the commute to and from work is so long that you come home to your family everyday tired and grouchy? Will you enjoy your new home if the schools your children attend don't provide the educational opportunities that you desire for your them?
My point is this: in a sellers market, buyers don't get all that hung up on price. They accept the price the market has determined for homes and focus on criteria such as location, functionality of the home, schools, neighobrood and so forth. Now that we are in a buyers market why should those factors suddenly become less important than price? Is the hapiness and well-being for you family lessened when a house is worth less than it was 5 years ago? I think not.
So where are we at in the life-cycle of this declining market? Unless you've skipped the first 6 paragraphs of this blog post you know I can't answer that. People who think they can time the market generally end up simply chasing the markets 99% of the time. The market will tell us when it has bottomed out. Not the other way around. Here are the facts as we know them today:
- The Detroit News reported today that the volume of homes sold increased in February for the 14th straight month when monthly sales are compared to the same month the year prior.
- An analysis of data from MiRealsource shows that every month for the past 6 months:
- The volume of houses sold increased when compared to the same month the year prior
- The Days on Market for houses sold decreased when compared to the same month the year prior
- The number of Expired Listings (homes listed for sale that expired with no sale) decreased when compared to the same month the year prior.
The unfortunate caveat to all this is at the same time the average selling price declined. So the market is still in a mode of decreased values. However, the increased volume, decreased days on market and decreased number of expired listings suggest a stabilizing force in the market that hopefully is foundation for recovery.
Whether we are at the bottom or not, here is where we know we are:
- Prices are lower than they have been in recent history
- Interest rates are still low
- Buyer inventory is plentiful
- Up to an $8000 first-time homebuyers credit
It's a great time to buy if you are in a position to do so. Please don't hesitate to contact me if you are thinking of buying. We'll discuss your options and you'll never be pressured into making a decision.
Your Agent Matters,
PS - Want to browse homes for sale on the MLS hassle-free? Sign up today for your free Listing Book account and access the MLS just like I do.