Comments left earlier that encompass most of today’s market conditions:
Elective sellers now believe prices will increase. Therefore, they are waiting to sell until they do. The REO inventory has all but disappeared. I’m surprised the decline in listings is only 20 percent.
Agreed, I’m surprised the decline is only 20% too, because it seems like nothing is for sale. But it probably feels that way because the good buys sell right away, so we see very few decent buys at a glance.
Over the next couple of months I figure we’ll see the spring bounce start showing up in prices. It will encourage sellers to optimistically list high although who know if the buyers will take the bait. The buyers out there seem to be educated and they’ve probably been waiting for awhile. If they waited out the bubble in the first place what’s another 6 months or a year.
In response, Raj said,
So, Lets see how buyers think currently : 4% interest rate ,Dow Peaking at 13K (401Ks are doing good ) and Decently priced home prices and stable job market in San Diego ( remember TopGun and Q). And still not many are pulling the trigger , why ??.
Simple reason (me included), we know for sure, interest rates are going to increase after 2014( praying it to be earlier), so there is a possibility that housing price might fall little further. So question becomes is it expensive to rent ( 20K per yr) for next two years VS buying a little expensive home right now at low interest rate. Another thing to consider is once we buy a home, we can’t move for a better paying job , unless we take a loss on home.
JtR response about those waiting, and what’s another 6-12 months:
It depends on your age. If you were 30 when the circus stopped in 2007, you are only 35 this year and (if part of a family) the kids are still relatively young. If you were 40, and now facing 45, the kids are older and you’re thinking more urgently about settling down. If you are 50+, you might have talked yourself out of buying now, or at least if you don’t find something soon. But for baby boomers, homeownership is part of our genetic makeup – and renting is only a temporary solution, typically.
JtR response to the housing handcuffs now being part of the landscape:
I think we have gone full cycle. From the late-1980s to 2007, the real estate market was extremely fluid, with many Americans moving several times. Mortgage rates were favorable, employment conditions were healthy, and a generally optimistic outlook prevailed. Now we’re hunkered down, hoping to survive, and homebuyers are planning on this purchse lasting them for the foreseeable future, and probably for the duration. For most of us, that’s the way housing always was for our parents – they typically didn’t move near as much as we have.
Another Investor said,
Personally I’ll never understand why people pay so much to rent. Who pays $4000/month to rent a home. If people are paying that kind of coin to rent it doesn’t surprise me that there ready to buy. 4 grand a month probably does feel like throwing money down the drain. If you got stuff that fills up a 3000+ SF home, so you can’t do the townhouse thing, and you love/schools location then might as well just bite the bullet and buy.
JtR response: Cross-reference the improved affordability with growing older/settling down, and the timing of buying a house today works for a lot of people. I think there are many who were patient enough to wait this long, and are now shocked that they aren’t being rewarded with having bank-owned properties littered across the landscape at drastically lower prices.
Those who can afford $4,000/month in rent are doing pretty good – they are accomplished folks. If you are making six figures or more per year, owning a nice home is part of the accomplishment package.
tj and the bear, about Davidson:
I remember similar quality & size new homes in good areas going for $150psf in 1990, which (per the CPI) equates to $262psf now; not too far off, really. That said, I still believe historically low rates are skewing prices significantly upwards.
JtR response: The low rates are definitely propelling the market, but constant meddling by the government is adding frustration to the buyers’ equation. How many are buying now because they are tired of waiting for the shenanigans to stop?
The problem with biting the bullet and buying now is the lack of quality inventory. As Jim has documented here very well, your options if you’re dead-set on buying now appear to be either 1) jump into the bidding-war fray on the few quality properties out there and be willing to outbid everyone, or 2) settle for a property with alot of warts. If neither one of these options sounds particularly appealing, it may make sense to rent for awhile and see what develops over the next few years.
Agreed, and you may change your mind about buying now after losing a few crazy bidding wars. Look at Chuck Ponzi, a diligent, patient buyer who goes all in to win a bidding war, offering well over list price, only to suffer defeat at the hands of a nameless opponent. Losing a house you really wanted will bruise the ego, and it isn’t easy to stay in the game. (get good help!)
Chuck, have you bought a house yet?