You won't.
I could actually stop there, but since that's not an entirely accurate statement, let's examine the question since it comes up so often.
What defines a "bottom"? Is it the number of homes sold? Is it the price homes are selling for? Or is it the number of homes on the market? These are all great questions, but you'll find that the answers aren't always clear.
If we're going to judge the bottom of the real estate market by the number of homes sold, then the bottom is behind us. We have seen year-over-year gains for several months now in our local market, and many markets throughout the country are experiencing the same thing. So if sales for December 2009, January 2010, and February 2010 are all higher than December 2008, January 2009, and February 2009, then you would have to say the bottom was around November 2009. For our local Huntington Beach, CA market, I would submit that November 2009 was not the bottom, but then again, what price range are we talking about?
I can't emphasize this enough, REAL ESTATE IS LOCAL. Very, very local. So when determining a bottom, you have to consider the price point for the sales in question. The homes in the $300,000 range have more than likely bottomed out, and probably a few months ago. The homes in the $500,00o to $600,000 range are probably finding their bottom as we speak (or write). The million dollar homes... maybe not quite yet, but that has more to do with banks, credit, and lending than it does to do with value (see previous post... http://robmagnotta.wordpress.com/2009/08/16/real-estate-101-buyers-market-vs-sellers-market/)
Okay, so maybe it's not sales data. So what about price? Again, we run into the same answers. If a condo were to come on the market today in Huntington Beach, Fountain Valley, Costa Mesa, Irvine, etc. priced around $300,000, and the price is correct for that area, it is almost a guarantee that there will be multiple offers, some cash offers, and many above asking price, all withing a week if not sooner. Conversely, a home comes on the market listed at $1,499,000 and is priced correctly for that area. Current days on market suggests somewhere in between 60 to 90 days for that home to sell {for those of you reading that and thinking to yourselves "Oh my goodness, that's so long!", no it isn't. That's a fantastic, and traditionally standard amount of time for a home to sell, especially one in that price range}. So does this mean we've found the bottom? Not exactly. I've given you an example of something that is happening in our local market, but there are homes that are sitting on the market longer than 300 days. Many of these homes are not priced correctly. Others simply aren't in good condition or lack the upgrades and amenties buyers seek in that price range. And let's be honest, if you can afford a $1.5 million dollar home, then you get to be as picky as you want to be. This leads us to the question of inventory.
Once again, price plays a factor. From the perspective of an agent who is very active with both buyers and sellers, the inventory in the lower price point is terrible... and by terrible I mean, simply not enough of it! I work with buyers regularly, usually several at a time, and there just isn't enough to show them below $500,000. Many people think that Realtors only want to work with buyers of expensive luxury homes. This is false. Not that you would turn them away, but a good agent loves working with all buyer in all price ranges. That's how you continue to improve your craft, build your clientele, and stay active and current in your local markets. First and foremost, a good agent educates buyers. Just as a good attorney and a good doctor are supposed to help you and protect you, so is a good real estate agent. You're making one of the biggest purchases or sales of your life, so make sure the person who is going to guide you through the process knows what they're doing! Would you let your doctor do surgery on you if you thought they didn't know what they were doing?
The bottom line is this. They best way to know if we've hit the bottom is by looking at all three of these factors and by comparing them to the same factors a year ago. Unfortunately, by the time you are able to clearly define the bottom, you've missed it. This is again why you need an experienced, knowledgable Realtor to help you figure these things out. I'm sure I'll say this everytime, but once you find a realtor you trust, let them do their job... which is to say, let them help you. Take their advice, follow their guideance, and above all let their experience work for you. We may very well be at the bottom today. But even if we're not, with interest rates near all time lows, prices severely depressed, and government incentives aplenty, it's a perfect time to buy that house (or condo) you've always wanted! Can you say "affordability"?
You don't need to wait for "the bottom". You just need to find the home you've always wanted. As always, I'm here to help!
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