Home buying: when should we step into the market? Too many are still wary.
Shouldn’t we be thinking about buying when everything is tanking? Unfortunately, the uncertain economic climate isn’t encouraging too many people to play contrarian right now. Many people aren’t quite ready to step up and buy just yet because they are afraid of “catching a falling knife”, which is what most investors concern themselves with when trying to determine when it’s best to get back into the market.
Unlike buying into a slumping stock market, purchasing into a deteriorating real estate market is trickier. It takes a lot of guts for one to sink a significant amount of money into something with a hefty price tag that fluctuates in value, plus sign up for half a lifetime’s worth of large payments to this end. With that huge price tag being a moving target, house buying these days has become a stressful activity that rivals the nail-biting effects of going on margin in a volatile stock market. [There are similarities here, given the leverage factor in both situations!]
So just how dicey is the real estate market in the eyes of average citizens out there?
Taking the pulse of the populace, an AOL Money and Finance Poll conducted earlier this month through phone interviews with around 1,000 people yielded these results:
- Close to 30% of homeowners worry their home will lose value over the next two years.
- But 40% think prices will rise.
- One in seven mortgage holders fear they won’t be able to make their monthly payments on time over the next six months. That’s 14%!
- 60% said they definitely won’t buy a home in the next two years, up from 53% who said so in a similar poll 2 years ago.
- Only 11% are certain or very likely to buy soon, down from 15% two years ago.
- 10% have adjustable rate mortgages; it was double that two years ago.
- Those expecting to buy soon are worrying the most. Of that group 43% frets that their home’s value will drop in the next two years, compared with 25% of those not expecting to buy anytime soon.
- 59% think now is a good time to buy.
- 50% think this is a very tough time for first-time buyers.
- Almost 2/3 of respondents think it’s harder for first-home buyers than it was five years ago.
- 50% think homes are still overpriced.
- 10% think homes are underpriced, particularly in the Midwest.
- 35% think homes are just right.
It sure seems that most people feel that the real estate market still has room to readjust further in the coming months or years, as evidenced by the following chart:
Mixed Thoughts On The Real Estate Market
So how ugly is this real estate market? Reports have stated that “foreclosures have soared to record highs, mortgage rates have increased, sales of existing and new homes have fallen and home values have dropped.”
With such an ugly market, I can see how this can awake confusion and mixed emotions among homeowners and wannabe homeowners alike.
My thoughts? There are many and varied, but I’ll share a few with you (but mind you, I’m no expert):
If you own a house and you want to sell — too late, you’re stuck. Sit on it until the tide turns then sell when things get better if you still feel like unloading. Unless you can’t wait out this property cycle and feel like you’re in over your head. If so, you’ll need to consult with a real estate attorney or CPA and have them help you assess your situation.
If you want to buy — ask yourself why you want to buy. Do you really have to? Are all the planets lining up to answer your American Dream? Then go ahead and you may find that this is a great time to do it, to realize that pride of home ownership. You’ll note that this market downturn is precisely the time when opportunities begin to reveal themselves. If you’re thinking about buying a home and looking to maximize your investment in the real estate market, then now is the time to prepare and capitalize on this window of opportunity. Beef up your savings for that down payment, begin checking out neighborhood home valuations and maybe even start connecting with real estate professionals who may be of assistance to you.
But if you’re after the best returns on your money, you may want to think twice about owning a house since it’s been shown that renting a home while shoveling your money into stocks instead of a house could make you richer in the long run. Though I’m sure not everyone will agree 😉 .
This doesn’t change the fact that the real estate market offers great prospects now that it’s deflating, but before you do anything with your money and your assets, it’s wise to take a step back and carefully assess your financial goals with reference to home ownership.
Image Credit: Appraisal Scoop
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