Houses and Bread

By
Industry Observer

Tell anyone that you're in the real estate business and many will immediately engage you in discussions about the market.  The discussion usually leads to their revelation of why they feel that this is the wrong time for them to buy and/or sell a home.  Most of the time, the reason is either that they are so far underwater on their home that selling is impossible, or they have some other credit or economic issue.  I understand and sympathize with people who are unable to buy or sell right now.  The folks who are choosing to delay buying or selling because they fancy themselves as some sort of real estate tycoon trying to time the market just don't understand what they're doing.

Imagine that you want to buy a loaf of bread.  You don't use a lot of bread, and the rest of the loaf you have is old, but it's not stale.  You notice that bread is cheaper this week than last, and that it was cheaper last week than the week before.  Do you hold out for another week in anticipation of another price drop?  The loaf you have now is OK, but it definitely isn't fresh, and it does taste just a little funky.

Unless you're out of money, you would probably buy a loaf of bread this week, not because the price is perfect, but because you want a loaf of bread.  It's true that buying that loaf of bread is an investment of sort, but it's obviously a consumable, and you're buying it to use it, not to put it on eBay to make a profit.

Just as that loaf of bread was bought to be used, so also is a home purchased by a consumer as a personal residence.  You don't have to find the perfect time in the price curve, you don't have to sell with perfect timing (whatever that is) if you're buying another home in the same or similar market area.  You're going to live in and continue to use your home until you're either dead or they wheel you and your drool cup into a nursing home.

Although the possible future appreciation of a home's value is an attractive feature, home ownership is, sort of like a new loaf of bread, something to appreciate and enjoy.  For all the consumer-analysts out there, where on the spreadsheet do you enter the value of a comfortable and secure yard for the kids to play?  Where do you enter the value of the freedom to have a big old dog greet you when you get home from work?  Where do you enter the value of the satisfaction you get from injecting your own personality into your home's decor?  Where do you enter the amount of time you will have if any, to enjoy the fruits of your investments in funds and stocks?  I'll give you a hint, nowhere.

You can make economic investments, and everyone should do that.  Balance deferred payoff with a lifestyle investment and an immediate payoff which you and your family deserve. 

Posted by

 Mike Carlier  Lakeville, MN

 

612-916-3033

 

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Rainmaker
2,551,623
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

We need both bread and homes if one wants to partake of the American dream and be full of it..good one

Dec 28, 2011 02:45 AM #1
Rainer
147,792
Michael S. Bolton
Michael S. Bolton,Inc. - Zimmerman, MN
MN Appraiser

Mike~Stale bread makes great French toast or stuffing; makes me hungry just thinking about it. Sooner or later people have to realize that prices are going to rise, and rise quickly-they're going to regret not buying when they had the opportunity.

Have an AWESOME day!

 

Dec 28, 2011 02:48 AM #2
Rainer
49,037
John Davison
Coldwell Banker - Cary, NC
Raleigh-Cary-Triangle NC

Mike,

Good post and good points.  Anyone who feels like they need to wait until the right time to sell should apparently keep their home forever, since they missed the boat and should have sold in 2005 and buyers waiting for the market to bottom out are idiotic because they are probably going to trade a few dollars less in sales price for a higher interest rate by the time the prices "hit bottom", thus costing them more over the life of the loan.  The bottom line is that people should buy or sell when they have the need and simply do the best to get the most or pay the least possible at that moment in time.  One thing I tell my buyers is this, keep in mind that if you buy now and get an FHA loan, that loan will be assumable five or ten years from now and your 4% interest rate will be a HUGE marketing advantage you will have over the going rates of 6%-7% at the time.  Get people off of the mindset of waiting for the market to hit bottom and educate them to the overall concept of purchasing home, immediate and future considerations in mind.

Dec 28, 2011 02:53 AM #3
Rainmaker
522,422
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

Richie, too many consumers spend too much time calculating with an incomplete data set.  A child has a shelf life of eighteen years, and a year of counting dollars significantly reduces the amount of time left in the "provide for by" date.  Thanks for commenting.

Michael, I thought they made penicillin out of stale bread:)

John, one thing that I find amusing is that people are willing to gamble a year or two of their life by remaining in their rental or poorly fitting house.  They are looking to save what?  Maybe $5-10,000, and in the meantime they buy a new truck, which loses $12,000 as soon as they turn the key the first time. 

Dec 28, 2011 03:56 AM #4
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Rainmaker
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Mike Carlier

More opinions than you want to hear about.
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