A few readers have made comments on why now is a good time to buy. Some of these are from a recent Money magazine article, others were added by readers. I thought we'd compile them and add to them, gathering the wisdom of the crowd.
Top 8 reasons to buy now (in Portland):
1. Record inventory, more houses to choose from, in all price ranges
2. Sales are down 40%, much less likelihood that you'll get into a bidding war, more time to craft a good offer
3. Interest rates are still low
4. Median prices have already dropped more than 7% from the August 2007 high, a savings of $21k on a $300k house
5. Some houses are being priced more realistically
6. Sellers are starting to drop their prices when they don't get offers
7. Sellers are starting to understand that the spring bump is more of a molehill, and are much more willing to negotiate
8. It's difficult to time the bottom (but not impossible!), but you're better off now that you were last year. Still, things are likely to keep going down, so don't be afraid to ask for more discounts.
We'll get to reasons NOT to buy now in the next post. But for now, what other reasons do you have?
Monday, May 12, 2008
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26 comments:
Did Congress approve the $7K tax credit for buying a foreclosure? I hear the banks are being stubborn right now but I am sure that will change as the mortgage insurers continue to suffer and the banks' portfolio enlarges.
Did Congress approve the $7K tax credit for buying a foreclosure?
Not sure if that was in last week's bailout bill, but Bush has said he will veto the bill... One of the few times I agree with Bush.
Regarding the 8 reasons to buy NOW!:
Pretty much all of these reasons could in fact be even better in six months to a year, no?
For example:
1. Record inventory, more houses to choose from, in all price ranges
I suspect that come October there will be even more inventory...
4. Median prices have already dropped more than 7% from the August 2007 high, a savings of $21k on a $300k house
So give it another year and get more like 20% off.
6. Sellers are starting to drop their prices when they don't get offers
Still not enough of this happening yet, but in six months or so?...
8. It's difficult to time the bottom
Maybe, but when it comes to housing busts the bottom tends to have an "L" shape, not a "V" shape - meaning that the bottom will be around for a while (a couple of years, at least) before prices start to increase again.
My biggest concern as a potential buyer is interest rates which will most likely rise post election? Higher interest rates will mean less buyers and lower buying power. Will prices continue to decline with increasing interest rates? History says 'not always'.
skeptictank: "Pretty much all of these reasons could in fact be even better in six months to a year, no?"
ssshhh! That's the next post, we're focusing on now. I'm waiting for the agents to chip in, anonymously or otherwise. here's their chance to give us the pitch.
Let's hear it! Or did I capture them all?
"My biggest concern as a potential buyer is interest rates which will most likely rise post election? Higher interest rates will mean less buyers and lower buying power. Will prices continue to decline with increasing interest rates? History says 'not always'."
That is one of my concerns.
As an example, a 16% increase from 6% to 7% would yield a 7% increase in monthly payment on a typical $300k house, but I'm not sure prices will fall to support that.
I do know that it will price a few more people out of the market, if it prices out enough people I'm sure it will drive down prices.
My sister in the Portland area has been trying to sell her 10 year-old home for $329k. Now, one block down the street, two foreclosed homes, similar size and design, have just gone on the market and are each selling for $219k. Yup, there are some good deals out there, and they are to be bought from banks.
what I'm wondering is if lower home prices will equate to lower lot and land prices and if builders services will be available at lower prices. I ask because I'm toying with the idea of building a new home from the ground up and I'm considering buying land.
The problem with building vs. buying something already built is that builders are cutting their profits to zero or below right now in many instances. In some developments that I have looked at lately prices have been reduced by close to 20% already (ahead of the resale market). Also, most municipalities have DRASTICALLY increased building fees and SDC's so that portion of the construction will be very expensive. Just my 2 cents.
You're all to impatient. In a year or two houses even in great areas will be 20-30% lower than now.
Timing the bottom in housing is very easy since the bottoms hold for such long periods of time. Like years. Price volatility of stocks is much different from real estate. The reason the RE industry is getting away with making the comparison to stocks is because the paradigm of housing has shifted from being a solid purchase that increases slowly and steadily (which it is and has been historically) to being perceived as a vehicle for a quick return wealth generator (which is how it's been viewed during the bubble- and it's not).
Did anyone happen to see that Whole Foods stock has dropped 25% lately, 14% 0f it today? People just don't have the bucks to buy over-priced (but admittedly gorgeous) food.
Don't you think that lack of the "wealth factor" is going to eat into housing prices, particularly in places like Portland?
I do.
Yar! It will definitely have in impact.
I know I will get slammed for this but I actually did price checks on numerous items I frequently purchase and QFC is about 10% more spendy than Whole Foods!
Though I am a Trader Joe's fan and I never understood why it has a reputation for being spendy?!
I would need to hear specifics on the WFC vs Whole Foods thing. Unless you're talking about their 360 brand which is much like what you'd get at WalMart or Big Lots.
Winco- now there's a deal.
anon 6:20, I hope you're right. I had to run the numbers the other day to remind myself. The house we're paying $1400 to rent would cost us $1900 per month with 20% down. And we'd like something a bit larger, one more bedroom so we don't need to trade up someday.
Does that $1900 include taxes, insurance and upkeep? Not to mention the lost opportunity costs of the 20% down that you might watch evaporate as prices decline further.
Most people, even the bubble bloggers, can't get themselves to believe how much prices are going to drop. It scares people.
Who's got the crystal ball showing that prices "in a year or two houses even in great areas will be 20-30% lower than now"?
"Does that $1900 include taxes, insurance and upkeep? Not to mention the lost opportunity costs of the 20% down that you might watch evaporate as prices decline further."
Yes, it includes taxes and insurance, no it doesn't include maintenance or opportunity costs. We're watching our savings rate dwindle, but at least it's in savings not stocks so it's still going up.
"Who's got the crystal ball showing that prices "in a year or two houses even in great areas will be 20-30% lower than now"?"
Not me, but I do have a few data points that would support that.
1. National City believes Portland is 40% overvalued
2. Median prices increased by over 20% in one year (definitely a bubble no matter what the clueless media thinks), so there's no reason why it can't drop that much.
3. Foreclosures more than doubling this year, and banks are much more willing to take a loss and move on, driving down prices.
4. We're already down 7% and accelerating.
5. Credit still tightening, driving X% of new buyers out of the market
6. Perception shifts from "just scrape together enough of a down payment to get into the market so you're not priced out" to "I can now afford to wait and likely get more for my $ later, plus save up a larger down payment."
Oh wait, this is all good stuff for the counter-post, why it's a good time to wait/rent.
"Who's got the crystal ball showing that prices "in a year or two houses even in great areas will be 20-30% lower than now"?"
Not me, but I do have a few data points that would support that."
But you're still predicting, or speculating. No one knows for sure what will happen, even Case Shiller - they are formulating PREDICTIONS.
Yet some people on these blogs state that prices will fall X amount in the future as fact.
How is it different from people who blindly predict housing will continue to appreciate? That it will always appreciate?
At least we naysayers have momentum in our direction.
yeah, I don't know how many times I have asked the "Portland is immune" folks to back up their statements. I usually got: a) everybody wants to live here (10,000 people A MONTH move to Phoenix metro area and look at their housing troubles) b) our economy is strong(really, how so?) c) our housing is affordable relative to Seattle and the Bay area (but relative to Portland incomes?) d) neighbors from the south continue to move here (aren't their prices diving and aren't they having trouble selling?)
I agree that we won't likely fall 40% like some areas (except some condos) but we are not immune
A 40% drop would mean a loss of 80% of the gains from the bubble. That's not out of the question.
I think we'll be shocked by just how bad things get for real estate.
I don't think many are still saying Portland is immune. I think most believe we're a little behind the curve, and that we won't fall as hard as the big bubble markets that the media are using to paint the whole national market with.
Housing values go up and down over time - they always have and they always will, just like stocks and bonds, inflation rates, income levels, etc. No one is saying that housing NEVER goes down, but it's a safe bet to say that once the economy straightens out housing values will once again appreciate until the next economic downturn.
"but it's a safe bet to say that once the economy straightens out housing values will once again appreciate until the next economic downturn."
On the surface I agree with this statement. But the way it's said makes me believe that you're assuming this is just a slowdown due to overall economic conditions, not a major correction due to wildly inflated values.
I think it's pretty well agreed what caused the run-up in prices:
1. Lax credit that increased the number of "qualified" borrowers, and dramatically increased their borrowing power.
2. Speculation, as less experienced investors jumped in, and other investors looked to real estate as an alternative to stocks which were underperforming.
3. Group-think, herd mentality, etc.
4. Cheap credit.
I'm sure I missed one or two, but I believe these are the main drivers, and all of them are gone. Hence, we will correct, and then at some point we will begin to appreciate. When and how much, nobody knows. If they say they do, they're lying.
Rule #1 of forecasting, you're almost always wrong, it's just by how much.
To go back to miturn's point, when people who are selling a house for good reasons (her sister we assume isn't flipping?), like being reassigned in a job, having to move closer to family to care for elder parents, whatever. Now they have to compete with foreclosures that are six figures cheaper. This makes it harder for people to sell for good reasons. And impossible for them to get a fair price. This chills buying/selling even more.
I think it's a good time for ya to sit tight if you don't have to buy or sell. Use the recession to build and appreciate your home life. If you're renting, sock the money away. I'm not sure that things will ever get "back to normal" or anyway "normal" isn't what people think it is after 30-60 years of expansion. And I doubt Portland ever was normal by any standards outside the educated liberal white collar PNW. Which is exactly why educated liberal white collar people move there.
People who really are eager to buy could buy much more house much cheaper here in Philly. But I'm sure it's too dirty and nasty and full of poor people and all, or they'd be here already.
Everybody left the east for the west and SF for Seattle and Seattle for Portland and Portland for Olympia or Ukiah or Eugene. Some day yall gonna come back home from the Manifest Destiny dream of leaving America's black shadows behind. We'll still be here. Sure could use some of that capital and energy. But we can't promise "normal" or "rich." Those things passed us by about the time the Erie Canal went in. ;D
polk
philly
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