Five Reasons Not to Buy a Home This Year.
http://realestate.msn.com//article.aspx?cp-documentid=17857568 – Information provided by MarketWatch.com
1. Prices are still dropping.
Data shows that prices are still dropping in many markets. If you buy today, your home could be worth less in a year or even two.
a. "People don't like to buy depreciating assets," said David Berson, chief economist for The PMI Group. According to PMI's most recent U.S. Market Risk Index, reported last month, the risk of lower prices two years from now has increased across the country. Half of the country's 50 largest cities had an elevated or high probability of seeing lower house prices by the end of the third quarter of 2010, compared with the third quarter of 2008.
b. Other home price measures haven't painted a rosy picture either. According to the Case-Shiller home price index, values in 20 major U.S. cities fell 18.2% in November, compared with November 2007. Prices are down 25% from their peak in 2006, according to the index.
c. Steep discounts in some of the hardest hit housing markets have some people wondering if prices could be starting to bottom. But some markets saw price drops later than others — and it could take longer for those latecomers to improve, Fifield said.
2. This sale will be on for a while.
From a pure investment standpoint, you'd probably be better off investing in stocks, said Nancy Flint-Budde, a Salem, N.Y.,-based certified financial planner. In a normal market, real estate appreciates about 5% a year, she said. But even if prices stop falling this year, as Moody's Economy.com is predicting, price appreciation could be weak for a while.
a. In fact, while some recoveries resemble a "V"-shaped pattern, this housing recovery could look like an "L" — once a bottom hits, prices will flat line, said Jay Papasan, one of the authors of the book "Your First Home." Prices likely won't rocket to housing-boom levels soon, as conditions are exacerbated by rising unemployment and foreclosure inventory.
b. The lesson: This housing sale could go on for a while, so there is no need to rush.
3. You may not stay put.
If prices continue to drop, you might have to be in that home for longer than you thought in order for the investment to make financial sense.
a. In any market, it's best to buy a home with the intention of staying there 5 to 10 years. This guideline is even more important today, when you might have to absorb more price drops and weather a couple years of slow price growth.
b. First-time buyers must be listening to that rule of thumb: According to research from the National Association of Realtors, the typical first-time home buyer in 2008 planned to stay in their new home for 10 years, up from seven years in 2007.
4. Your job could be the next to go.
Most Americans are concerned by the headlines of job cuts. Perhaps you have friends who have recently been laid off. If you think your own job might is in danger, stop right there — and stay put.
a. Even if you're comfortable with your own job security, investigate how your future neighbors are faring.
b. Real-estate agents know to pay attention to local market conditions instead of national trends. Don't stop by only looking at neighborhood home prices; the health of the local job market is also important to consider.
c. Have there been many layoffs in the area recently? What are the largest employers, and are they in industries that are suffering severely? Is the local economy diversified?
d. What is the state of the job market in my area, and my metro area in general? This will impact overall demand. At the very least, get a sense of what the local inventory situation is like, relative to demand, to anticipate the pressures on prices over the coming months or years, he added. e. It's best to get a broad picture of the housing market, rather than simply asking yourself, "Can I afford it or not?”
5. Your cash reserves will be eaten up.
Given the recession and the fragile economy today, even if you feel confident about your job it's wise to have a cushion to land on in the event you get hit with a financial broadside, a divorce or a major health bill, for instance. If your down payment would deplete your rainy day fund, keep saving for a while before house hunting.
a. Even if you feel like you have job security, it is much smarter to have five or six months of expenses to have aside. Having a reserve is a wise thing in this economy today.
Hopefully we call all turn the negative around into a positive to generate more closings!
Please add me to your blog subscriptions as well!
Thank you,
Chris Hyzy
BG Properties
Realtor - Investment and Foreclosure Expert
Property Management Director
Dallas/Fort Worth Metroplex
chrishyzy@realtyagent.com
Comments(10)