Is it a good time to buy a house?
by Scott Robinson / Robinson Realty
I often “sort of” jokingly say “It’s always a good time to buy a house from me.” Joking sort of…. Most people’s reason’s to buy a house have little to do with the market. Most buy when they can, for financial and personal reasons. Most people don’t wait till the bottom of the market to buy a house. I have never checked the statistics for every crash and boom, but as my memory serves me most people seem to buy when prices are at their highest. The sad thing is most people usually can’t afford to buy at the bottom of the market.
Sound strange? We have tops and bottoms for reasons. The bottom tends to happen for mostly one reason, the money goes away. When money gets scarce like in 1983, the year I received my license, interest rates stayed at about 18% for about a year or so. That made it fairly hard to sell your home or buy one. Sellers who wanted to sell, sold their loans with the house and carried the rest, it was called a “wrap around loan”. The seller used their first and maybe second loan on their home and didn’t tell the lender they were selling the house. They would just keep making the payments and the lenders in those days never checked. Then they would often carry/personally lend the buyer the rest of the money. Some lost their homes because they didn’t plan on getting them back and didn’t have reserves to weather the storm.
But many sellers did real well. Few who did their homework lost out. In this case “homework” was checking out the buyer and making sure they were somebody who would make the payments. They were stable in life and job. Not a bad deal for many sellers if they had to take back the house they kept a ten percent plus down payment and many months of payments. Yes, it would take them 90 or so days to get them out and some wrecked the houses. But if you really checked the people out, it tended to be a pretty good deal all around. Back to the point it was a tough time to sell or buy a house. So those that “had” to sell (Job relocation, divorce, job loss….whatever.) “creativity” was all there was. So if a cash buyer came along he was king. I must point out I wrote this a few years ago. This down market has been fueled by cash buyers many from other countries, unlike any other down market. So there are bidding wars, when last bust nobody had any money!!
So the people that got the really good deals, as always, had cash. Few have cash, so if you have it you can really get a good deal in almost any market. Right now cash buying one house will get you as much as a twenty percent discount. If you don’t have cash like most people you have to work a little harder and be a little more creative. This will often involve buying fixers, and I know many I have helped make money buying and selling fixer properties.
This is a very unique time in that prices are low and interest rates are low (This time prices went down, even though money stayed cheap.). So if in a year prices are lower and interest rates are higher, it will cost more to buy the same house. Higher interest rates make it harder to afford the property. That is one of my arguments for this being a very good time to buy. Don’t miss out on this market and there are indications it is starting to go back up.
So how do you know when it’s really, really the best time to buy? Generally it will be when your accountant tells you, it will save you a lot of money to do so. But the answer to the classic question is, when you hear people saying things like; “You would have to be crazy to buy real estate in California.” Everybody is leaving the state, it’s doomed.” Or right after a big canyon fire or earthquake. I have heard those words at the bottom of the market many times, never at the top?? As dismal as things may seem at the bottom, people must realize things go in cycles. And great prices at the bottom will often be enough to make that change (As is happening now in our current economy).
At the top of the last boom I heard people raving about getting these great loans and not noticing they were buying very overpriced homes. There was a “frenzy” to do so all the way to the top/bust and then it all went away for about six months. At the height of every boom, it’s a bidding war on most houses to pay above top dollar. It’s amazing to see, and then the bottom falls out? I have seen it three times, twice as a Realtor. The second one I predicted the fall and saved a few believers. The third or last one fooled me by a few years. But no worries for investors, people who want to make money in real estate, the time to buy is when you find a really good deal. Then if the market is selling/ falling, you must sell fast. If it is going up, take your time and do it right. Do all the visible repairs and time the market by selling in the spring (Generally the best time of the year to sell).
So it worries me that I am not hearing the doom and gloom like the last two. But I am still betting anything you buy will be worth a third plus more in five or so years. I have been hearing for about six years that millions of REO/Bank owned properties are about to be dumped on the market and that will crash the market. I have been waiting a long time to sell these great deals, when and where are they??
In every “boom” market, by definition a lot of houses sell, hopefully you buy before the “boom” and sell during. My dad used to tell me, “Buy when everyone else is selling and sell when everyone else is buying.” This was his (My dad was a stockbroker.) general advice which richly applies to real estate. When you hear people say “You would have to be crazy to buy now!!” It’s probably the best time to buy. I heard it right after the 1994 January earthquake. Can you imagine how much money you would have made buying destroyed properties in Northridge the day after the quake??!! In six months you would have made more than ten times your money.
For six months after the quake most people were very shook;-} Many had lost their homes and were desperate to find one among the few left. If you mentioned Northridge people would yell at you like you were crazy to suggest it!! Six months after the quake people were jumping on “All the great deals in Northridge. It took them six months to forget about the quake. Same with a Topanga Canyon fire. For a few months people will act weird about buying there, and then there will be a frenzy to buy. Good deals seem to draw the people out sooner or later no matter what. So why not recognize that trend or any other and take advantage of it if you can (Have the money).
Now the truth is most people buy when they can afford and need a house. Not at the bottom of the market. As I said, most buy towards the top(That’s usually when there is a lot of money/low interest rates in the economy. So I say anytime you come to me it’s a good time. It’s a good time because I appreciate your coming to me;-} and I know how to make the best of the market and get you the best deal for the time and market. Since you came to me because it’s the best time for you. I may suggest waiting for some period of time(A few months can make a big difference, sometimes.), but your needs will rule this situation.
Each year has it’s periods and they effect prices and availability of homes. So depending on my clients situation we can maybe take advantage of their having cash or great credit. Or I can help them clean up and improve credit for the best deal. Depending on how fast they need to move we can take advantage of Spring having a lot of the better homes and a lot of activity or winter when few buy and there are better deals.
I always tell sellers that the best time to sell is April first. It’s kind of the beginning of Spring and the hottest time for selling real estate in most places. Some places are seasonal like Miami and get top dollar when all the tourists are in town for holidays. In many areas Spring is a fun time to buy or sell a home. It’s when all the really cool houses hit the market. The really well done homes are thought out and marketed in the same style the owners fixed them up with. But of course this depends upon your area and thus the need for a good local Realtor to point these things out for you.
The best deals are after Thanks Giving, a time when most are thinking of holidays and the market is mostly investors. I must admit I see the possibility of prices going down for a few more years. Right now and for the last few years, prices below seven hundred thousand have been going up. Many to cash out of country investors, out of the MLS or the Multiple Listing Service I and other agents use. I know because I lost out on a couple of multiple offers this year to them. The market under seven hundred was generally hot. Over eight hundred thousand suffered, dropped and is suffering still. Some awesome deals in that price range, especially for cash. I recently saved a cash buyer about twenty percent on a fairly new home in great shape. Some think these deals will be around forever. Don’t be fooled.
So using a current and extensive knowledge of the market, predictive searches for properties, and sage negotiating skills, I get the best deal for those who need to buy in any market, especially this one. As much as the normal home buyer tries to time the market, they are throwing away money on a rental or a house that doesn’t fit their needs. Not getting the tax benefits of home ownership. Not enjoying making it theirs and profiting from their creativity, by trying to wait out the market. And most miss the bottom anyhow. Most investors who wait could have “flipped” two or three while they waited and made quite a bit of money.
So most should start saving money for a down payment. Check your credit and start cleaning up any issues. Credit issues are much more fun to work out at your leisure than at the last minute after you have spent months finding the home of your dreams. So after you find a lender you like to work with and get a pre approval letter. Then you are ready to start checking out neighborhoods.
Please let me worry about the problems and help you solve them before they become issues in our deal.
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