Most real estate agents advise their clients that this is a great time to buy, with lots of inventory, motivated sellers, heavily discounted prices, and near historic low interest rates. Even though this is true, many prospective home-buyers (as well as some nationally respected economic experts) believe that home prices will continue to fall. So these would-be home-buyers don't want to overpay for a house, and feel that if they wait they may be able to get a better deal. I don't know how much further home prices will fall in Southern Oregon, but I do know that these prospective home-buyers should also consider potential increases in financing rates, their future ability to qualify for financing, and their ability to time the market.
Our local media are pretty good at tracking and reporting year over year drops in median home sales prices, but they don't do such a good job at following affordability. The median home price in the Rogue Valley is currently about $230,000. If local prices drop by another 10%, but interest rates rise by 1%, then a new homeowner's monthly payments would be about the same as if he or she bought now, and any benefit in waiting for a lower price would be wiped out. An even worse circumstance for the would-be home-buyer would occur if home prices drop by less than 10% and interest rates rise by 1% or more. The Fed is keeping the prime interest rate low for now, but that could change relatively quickly with inflationary pressure, and it's also become painfully apparent that lenders are not obligated to offer low rates to consumers just because the Fed lowers the prime rate.
Although the Medford, Ashland and Grants Pass housing markets are still buyer's markets, with a significant inventory of homes for sale, it's important to be aware that that inventory is declining. With a relatively healthy employment environment in the Rogue Valley, there is pent up demand for home purchases, created by prospective buyers waiting for home prices to hit bottom. The dilemma is that we aren't going to know when home prices have bottomed out, we'll only know after the fact. Once it becomes obvious that home prices are starting to rise again, then many of those prospective buyers who are currently sitting on the fence, will jump off the fence to take advantage of the bargain prices before they go away. As pent-up demand turns into purchases, you guessed it, prices will rise even more, and buyers will lose some of their current leverage in negotiating price reductions, closing cost concessions and terms.
It's obviously better to buy before home prices hit bottom, than afterward. And since it's impossible to know when they're going to hit bottom, I'm advising my clients to buy if it makes sense for them now, regardless of future market conditions. If they can find a home that they are happy with, that meets their family's living needs, with payments they can comfortably afford, then that's an investment that makes sense now!
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