Tom Shea with 1st Mariner Mortgage has shared this with me and I think you will find it enlightening.
I keep getting the “is now the time to buy?” and the “I have
a home to sell first and I don’t know if I should wait?” questions from
clients. I can only imagine how many times you all have to try and answer
these questions each day. The fact is the housing market is starting to
The Real Estate recovery is unfolding exactly
as it should and exactly as most experts have predicted. We are still in “Step
1” of the recovery: working to sell off the current oversupply of inventory
(too many homes for sale). This oversupply is the reason prices have not
yet started to rise in many parts of the country.
The number of sales is increasing nicely and
that is one way we know the recovery is taking place. When the number of homes
for sale reaches a 5-6 month supply, we will then be back in a “normal” market,
instead of the “buyers market” we have had over the last few years. Most
experts feel that we are at least 18-24 months away from getting to a “normal”
market status. Once we are back in a “normal” market, prices will begin
to go up at a healthy rate of about 3% per year (3% appreciation…versus the
depreciation we have had). Some other factors that let us know the
recovery is under way is the fact that pending home sales (under contracts) are
at their highest level since 2007 and prices on average are at 2003 levels
(this shows prices have adjusted downward as a result of the oversupply).
on what this all means to you
should be your biggest concern and that depends on your point of view.
This all means that your house is
worth as much today as it is going to be worth for a while. Prices are not
fluctuating by large amounts right now they are either up or down by very small
percentages. Even when the market begins to return to normal the gains per year
will be small and gradual (1% to3% annually). Some projections say that in the
next 18 months there will be an increase in value of 1%… Here’s the perspective
you need, if you want to wait for a year and a half for prices to go up the
most you would gain is 1%, so if you have a $250,000.00 house you would be
waiting 18 months for $2500.00….doesn’t seem worth waiting for, does it?
Especially when you consider what your reason for moving is in the first place.
If you are moving to be close to your grandchildren is it worth waiting until
they are two years old before you are closer to them just so you can have
$2500.00 more dollars? Just one example….
There is zero question that now
is the time to buy a home. Even if you have a home to sell (see section above
about Sellers). The selection of homes is incredible (Buyers benefit from the
oversupply because selection is great and prices are great) Also, as of this
writing, interest rates for 30 year fixed rate mortgages are 3.59% this is so
low it is unheard of….this is what you would call “cheap money”! Don’t
wait until the market has recovered because if you do the selection of homes
will not be as good, the prices will be higher and the interest rates will be
higher….probably much higher.
You should be rejoicing. This
kind of market only comes around once in a generation or so. Money is
cheap and prices are low. The rental market is extremely strong right now, it’s
certainly a “landlords” market. Houses are now cash flowing and showing very
good returns on investment. Investors, if you wait, you will miss your best
chance at earning the wealth that history proves is best earned in real estate.
In summary, sometimes in life you really have
to step back and gain some perspective. Waiting is sometimes the right course
of action…as long as you know the value of what you are giving up by waiting….
You may make 1% more or you may
lose 1% less but maybe not….the one thing you know for sure is that time
waits for no man (or woman) – you can never get today back. You can never
spend the time with your grandkids that you’ll miss while you are waiting on a
1% gain to your home’s value. Don’t be the one we have all heard say….”If
Only”….Don’t be the person who says “I could have bought that home ten years
ago for xxxx and now it’s worth twice as much”. I’m putting my money
where my mouth is as I’m buying my second investment property in Myrtle
Beach. The first is positive cash flow on a 15 year mortgage and with
money so cheap I really don’t want to be the person who “missed” this