Thursday, August 23, 2007
The proverbial question: When is the right time to purchase a home?
If you're in a hurry and don't have the time to keep reading, the answer is YES!
In 1999 the median home price in the Orlando area hovered around $105,000**. As of July 2007, (after already losing substantial value in price) the median home price still stands at around $250,000. Over an eight year period the average homeowner realized a 138% profit or 17% per year. I know a lot of investors who would love to make that in stocks and securities.
But let's backup for a moment. Not everyone views their home as an investment (Don't ask me why). My wife explained this to me while we were looking to buy ourselves. While I was concerned about the area and being in the best schools, she was concerned with the overall picture: Is it a house that we can make a home? She asked. After all, isn't that the reason we desire to own? The profit is just a side effect.
Homeownership creates stability, family unity, quiet peace and enjoyment, pride of ownership, and a base to build all other life changing decisions from. So why are buyers so afraid to buy right now? Read the "Slantinel" or watch any major news network and you will see. "Market crashing", "Big Housing Bust", "Record Foreclosure Rates" are just a few headings I've seen lately. Boy, they really love BAD NEWS! You have to keep in mind that, "If it bleeds, it leads" is the mantra of the news media. Let me share with you how I feel on the subject.
No one (including me unfortunately) will ever predict with any accuracy, the turn around, or downturn, of any given real estate market. Take a minute to digest that. I've worked with the best agents, developers and some of the most talented minds in the business and no one called the October 2005 turn that happened. The news media will tell you that they did, but that's not exactly accurate. They started predicting a "housing bubble burst" in 1999 and continued to do so on a regular basis for the next 7 years . I guess anyone could predict something with that kind of time window.
With that said, the only way any buyer will know when prices have hit "bottom" is when prices have already started to go back up. Think about it. In the meantime, sellers are offering bigger and better incentives than I think anyone has seen in a long time. Closing cost concessions, huge price reductions, free lawnmowers, golf carts and even cars!! These are all the benefits in buying in a declining market. While some buyers are waiting for the bottom to come (and don't forget...pass them by...), others are cleaning house (no pun intendedJ)
I spoke with a buyer the other day and he told me that he was going to wait to buy until the market hits rock bottom. As I mentioned earlier this is nearly impossible to accomplish (on purpose at least) which means he won't be buying at the bottom, he'll more than likely be purchasing just above the bottom, and more importantly after the bottom. He won't benefit from the incentives a declining market provides, his market will be called an "appreciating market" and sellers, as some of you may remember, aren't as friendly.
One final thought, if you're planning on buying a home and selling in the next 6 months or 1 year, do us all a favor and RENT!! But, if your goal is to own a home and live there for the next 5 years or more, don't try and time the market. Buy now and reap the benefits of motivated sellers and low interest rates.
Kory Benken, REALTOR, G.R.I.
**Market statistics taken from Orlando Regional Realtor Association's website.
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