I can’t finish the headline, it is too misleading. I want to say this is a great time to buy and sell real estate but I know that is not the case for everyone.
I offer my own situation up as an example of a situation where now really is a great time to buy and sell. Is my home worth more than it was a year ago? Honestly I am not sure, I think it is worth about the same, maybe a little more. Now would be a great time to sell it and I told my husband that just that a couple of days ago.
No we are not going to sell, mostly because we are both too busy right now to be interested in moving. We bought our home in 1989 for $54,000. It is has shot up in value over the years. We owe so little on it that we could just pay it off. It will be paid for in a couple of years, maybe sooner.
We could sell our home. If we wanted to sell it quickly we could lower the price enough so that it would sell in less than a month. We could either buy a nicer home with the equity and take out a mortgage for about what we owe now, or we could buy a smaller place and pay cash for it.
If we did decide to buy we could find a home and negotiate and get it for a good price. I know things and that would be an advantage to us.
You see we did it all wrong. We bought a house in a down market when the interest rates were high. We even bought in a neighborhood where home values went down during each of the first three years we owned our home.
We bought
it because we wanted a place to live and to raise our children. They both turned out just fine too. We wanted a place to call out own, with a big enough dining room so that we could have the family over for thanksgiving. We wanted a place to put our Christmas tree and store our stuff. Rooms to sleep in and even a room to relax in. . . oh and I grow flowers here too, the pictures were taken in my backyard. I can’t wait until spring when I can fill the beautiful planter that my brother and sister-in law sent as a gift, with flowers and put it on the porch right outside of my home office.
In recent years I think many of us have lost site of what home ownership is really all about. We all need to have our basic needs met before we can achieve anything. Those needs are simple, food, clothing and shelter. I suppose there are a few more but those really are the basics.
While our home was being used to fulfill a basic need it was also appreciating and increasing in value. Kind of a bonus if you ask me. Today we could not find an apartment any where in St. Paul that we could live in for so little. Renting the smallest apartment would cost more than our monthly mortgage payment even with taxes and insurance added in.
We never used our home as a piggy bank. For years we received offers from various lenders encouraging us to borrow money against the place and use our equity for all kinds of things. Yes the rates were very good but the problem I always have with borrowing money is that I need to pay it back. It is hard to get me to take out a car loan. I have not financed a car for many years. Probably why I drive a mid sized sedan instead of a SUV like most of my Realtor buddies own.
It really is a great time to buy, and sell.
T
I wasn’t sure where you were going with this at the beginning, but you “took me home.”
Great read and spot on.
Kevin – I knew where I was going. 🙂 Thanks for stopping by, always nice to see you.
Lets examine what you did first you bought when the market down at a high interest rates. Buying the worst house is not so bad if the area is good. But the important thing is you did it some time ago and for that you have significant equity to come out on top to right both the other to negatives.
I say buy now lots of inventory & lower interest rates. This is actually the perfect example of the person who qualifies for the loans and homes that are out there today. You could put a significant amount on your new home and have a minimal payment and see a profit in years to come as you did on your last home.
Caution sell your home first before you start the search.
Dear Ms. Boardman: Lots of people, myself included, feel today the same way you did in 1989: we want a safe, functional home in which to raise a family. The basic message of your post seems to be that no matter the conditions when one buys — high interest rates and declining prices included — the financial aspect of homeownership will be just fine if one stays put for a while and doesn’t take out home-equity loans. Throughout almost all of American history, that message was absolutely accurate. But the inflation in housing prices between 1998 and 2005/06 was way out of scale with anything this country ever had experienced, and prices have only slightly corrected since their peak.
Sure, everyone needs shelter, but not everyone needs to own a home, and many shouldn’t. At current prices, the only people who should be buying are those who either (1) can commit to being in that home for 15-20 years while prices fall off a cliff, limp along for a while, then creep back up, or (2)can afford to lose quite a bit of money when they sell their home.
Your home was worth $54k in 1989 — that’s less than 20 years ago, and without knowing anything about the house, I bet it now could be sold for more than double, even triple that amount. You’re very fortunate, but those conditions won’t be repeated.
By the way, your flowers are lovely.
Bubble_Up
Bubble_up – it has gone up more than quadruple the amount. I don’t have any evidence that home prices are going to fall off a cliff. Maybe we should have a friendly bet on this. I do agree that home ownership is not for everyone but I do not agree that it isn’t for anyone. I think people are being some what irrational about it but know that people will continue to buy homes, maybe more for emotional reasons and will continue to reap the financial rewards of home ownership as well.
Maybe you’re just not looking hard enough for that evidence, and who could blame you? Monday’s St. Paul paper — you are in St. Paul, right? — reported that at last weekend’s new construction auction in Minneapolis, “Winning bids ranged from 20 percent to 75 percent off the original listing prices.” Monday’s St. Paul paper also contained a second article stating that “U.S. home prices plunged by a record 8.4 percent in November, marking two years of slowing returns, according to a key index released Tuesday.”
As to that friendly bet, you’re on: I say that during 2008, average sale prices in the Twin Cities will decline by at least another 5%. In a market like yours, that kind of one-year decline is unheard of, right? I’ll send you some real, not virtual, flower bulbs if I’m wrong — you pick the variety. And if I’m right?
Bubble_up – you may find this hard to beleive but not everything the media puts out is correct or accurate. I do beleive prices will decline this year in St. Paul and maybe even by 5% but I don’t believe they will “fall off a cliff” and I do not beleive that homes will never again go up in value. We built way too much here in the last couple of years, so it makes sense that they have to unload it. Like the bulbs idea, and I will have to come up with something for you. 🙂 First though we have to have our bet. I will bet that home prices will decline in 2008 by as much as 5% in some parts of St. Paul, go up in other parts by 2 to 6% and that they will be stagnant in 2009 and increase again in 2010. I don’t believe in painting an unduly optimistic picture nor do I beleive in doom and gloom. Don’t beleive in much of what the papers say or in NAR forecasts either.
If I was in your situation. I would sell my house. Invest the money and use the profit from the investments to pay rent on a home for a few years. Then after the market has hit bottom use the profits from the sale of your home to by a new one, plus have some money left over. Selling a year ago would have been best as you probably can’t get today what you could a year ago.
Michael – selling a year ago may have beeen better but buying is better now so it all comes out even. I don’t think people get that. As for reaching the bottom no one will ring a bell when we hit bottom. I would rather leave my money where it is, in my house and live here for awhile longer. It would cost at least twice as much to rent as it costs to live where we do so renting doesn’t make sense.
That is a good point that it all comes even. Most people don’t realize that declining home prices don’t hurt most people. If you buy sell your house, you take a loss on the sale, but if you buy a better house you save even more than you lost. And of course lower prices are good for first time home buyers.
I’m surprised to hear you say that it is a good time to buy. I’ve been reading your blog for a while and I don’t think I’ve every seen you write that. Which is one of the reasons I like your blog, because even though your job depends on people buying houses you never seemed to push the “now is a great time to buy” line you hear from every other realtor.
Is it really a better to buy now than to wait a few years? What is the point of buying a house now if I can get the same or similar house for less in a few years?
It seems the NAR is always saying “now is a good time to buy”. When is it a bad time to buy?
Thanks Michael, I would never make the statement that it is a good time to buy. I depends upon the individual, for me it is a good time to buy. I have no reason to believe that all houses will be even cheaper in a few years. I think in a few years they will be more expensive than they are now.
You did say in the last line in your blog “It really is a great time to buy, and sell.”, but in your response to the question from Michael “When is it a bad time to buy?” you contradict yourself with “Thanks Michael, I would never make the statement that it is a good time to buy.” What one is it??
MT – thought I made it clear in the blog post that it is a great time for me to buy or sell. Did not mean it as a blanket statement. I have spent quite a bit of time in recent months advising some of my clients not to buy right now. Often it is becasue they have no equity or because they simply do not have enough money. I did not mean to mis-lead and it is not a good time to buy for everyone. There never is a time when it is a good time to buy or sell for all. It ticks me out that I see that in the advertising of some of our local companies. I don’t think consumers are buying it but I still hate seeing it. very misleading. Right now is a bad time to buy for some and a good time for others, and maybe the best time for me.
Hi.
In order to bolster the point that prices are in for a sustained decline, we have to examine the components of pricing, and understand motivation.
There will be buyers at every price point on the way up, and on the way down. For reasons that are obvious – people need housing, and motivations are different.
We are entering recession. Few doubt this now. Additionally, this recession will be the worst since the 1980’s. Probably a lot worse. Daily, bank capital is being destroyed by write-downs. That process has a ways to go. This is far more serious than people realize. This banking crisis is unprecedented since the 1930’s.
The ability to pay, and even more important, the willingness to take on debt is undergoing a massive shift. This cannot be blamed on ‘negative media attention’.
Red herring.
Prices will continue to decline until inventory is cleared. We are not even finished with the option arm resets – we have barely started. Since the option arm came into use late in the game as an affordability tool (HAH!), most option arm buyers are probably upside down.
Thus, THERE WILL BE NO refi for many/most option arm borrowers.
S&P has reported that 75% of option arm borrowers pay the minimum payment, are are thus negatively amortizing. More destruction of bank capital.
For real estate agents, I recommend that the get AGNOSTIC on pricing real fast.
Sellers will have NO ADVANTAGE for the forseeable future. The longer that buyers are at the advantage, the more aggressive they will become.
Remember, at each stop on the way to the bottom, it is the less-aggressive buyers that capitulate and buy. Guess who is left as we approach the bottom?
Me. I’m immune to fear of being priced out and immune to happy-talk. I no longer believe in the doctrine of “equity”. Equity is misunderstood by many and worshipped by nearly all.
For the next year or so, people may begin to forget that “negative” and “equity” were ever used separately.
Maybe I’ll chicken out and buy before the real bottom. If so, you’re gonna like selling to the people who come after me even less.
Sorry to be obstinate, but unless I see a big reduction in inventory and a big increase in consumer confidence, will remain a:
Patient Buyer
Not to beat a dead horse, but my problem with anyone making the statement “Its a great time to buy or sell” is that they are implicitly telling you that they know what the future holds. The NAR, spewing their endless supply of “BUY NOW” propaganda, has turned off so many consumers such as myself with this tactic. The problem when making this statement is no one knows what the future will hold. We can make guesses, but you simply don’t know. To pick on your statement, Teresa, if you are currently in the market to sell a “great” time would have been last year or in 2006. We know that now. We don’t know if its a “great” time to buy now. If you buy, and prices shoot up (doubtful) and interest rates rise (likely) then you would have been proven right. If you buy now, and prices fall (or worse you lose your job or good health or some other outside factor), it wasn’t such great timing. To state “its a great time to buy or sell” is not only a contradictory statement, it also loses one’s credibility as there is no way to know in the future what prices will hold or what your individual situation may be. With the benefit of time, we can qualify these past decisions, but anytime someone offers me a prediction it turns my “look out for the sale” guard up and respect down.
As my last post can read a bit negative, my MN nice disclaimer is “Thank you Teresa for providing the forum to debate this and for taking the time to respond to comments.”
MT – no we do not know the future. It would be sad if my husband and I bought a house today, and I died next week and he could not make the payments by himself. If we knew that I would step in front of a bus next week and be killed both of us would do things much differently this week. We probably should live like this is the last week of my life but we just don’t think that way. If I knew everything that I know now 20 years ago there are a few things I would do differently.. . not many but a few. The company that I worked for that offered me stock options as part of my pay. Never should have said yes to that. the stock went from 38.00 a share when I started and is worth maybe 3.00 a share today. Silly me, always taking risks.