Is now the time to buy a home or wait it out?

Todd Barattini · 04-27-2008, 11:59 PM

Just wondering, for the last 3 months we have been looking at new homes to purchase and it seems the housing market is in the toilet now which means now should be the time to buy? However, if you watch most of the market factors it appears the worst may not be over? I mean, come on, $4 a gallon for gas, rice being allotted in sams clubs and costco, it seems to be scary times. So, should we wait it out or make a good buy now? The area where we have been shopping for homes in the past three months, we rarely see a house sell, apx 98% of all the homes we look at are still on the market and it appears very little are moving. The majority of these are brand new homes and some have been on the market for over 250 days and have never sold. We have been in new subdivisions where entire streets are lined with new homes are most sitting empty. We have seen numerous new subdivisions pop up and abruptly come to a halt, 5-10 homes built in a 2-300 home subdivision is not uncommon in this area. Keep in mind in 05, Katrina caused our market to explode and now we see that the builders built way too many homes and none of these are selling in todays market, which in our eyes should equal a buyers market. However, we dont want to buy in a dead market if in the event we need to sell in 5-7 years, we want to walk away ok with a few bucks, which is how we have always been able to do. Whats the consensus?

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Eric_L · 04-28-2008, 06:27 AM

the first reason to buy a house is because you need one. Whether you want to buy or rent is up to you. Factors include, payments vs. rent. Your tax situation, duration of use, customization desires, local property tax rates, insurance, etc.

Nobody can speculate what any economy will be like in five years, but I doubt it will be vastly different from today - either way.

Trying to catch the bottom of a market is like trying to catch a falling knife; so if you are buying you had better have a better reason than low prices; like the desire for your ultimate home theater room! XD

Todd Barattini · 04-28-2008, 09:18 AM

We would best be described as "flippers", we normally move up every 5-7 years...fwiw

WillG · 04-28-2008, 09:49 AM

Quote:

However, if you watch most of the market factors it appears the worst may not be over? I mean, come on, $4 a gallon for gas, rice being allotted in sams clubs and costco, it seems to be scary times.

Aplogies for going off topic but I'm happy (well, maybe not happy) but glad that someone is bringing this up. My wife and I right now own a condo and we have for a while been keeping out eyes open for a suitable house. We do okay salary wise, but we do live in a very expensive area. We really like where we live and have easy commutes to work so naturally this makes it tough for us to find a halfway decent place that wouldn't put a tight squeeze on us financially. But anyway, lately, I have been harboring some real concerns about the economy. I'm only about to turn 31 so I'm still pretty young in terms of economic awareness. But it can't remember when I've oil and gas prices rise at the rate it has for the last two years or so. Prices of food as well. Oil is well over $100 a barrel and and $4 a gallon at the pump is now a reality and it we're still a month away from Memorial Day. It seems like the news just gets worse and worse. I do realize that the media thrives on perpetuating fear, but still some things you can't make up. Granted, the sky still hasn't fallen, but does anyone think it is possible that the U.S. could in the not too distant future, or is on the verge of suffering some kind of very significant financial collapse? For example, with energy the way it is, I feel that another Katrina scenario could have some very severe economic ramifications. Am I the only one who feels this way? I'm not an expert in this type of thing so I would be interested to hear some other opinions

Philip Hamm · 04-28-2008, 09:53 AM

Quote:

Originally Posted by WillG

It seems like the news just gets worse and worse. I do realize that the media thrives on perpetuating fear, but still some things you can't make up. Granted, the sky still hasn't fallen, but does anyone think it is possible that the U.S. could in the not too distant future, or is on the verge of suffering some kind of very significant financial collapse? For example, with energy the way it is, I feel that another Katrina scenario could have some very severe economic ramifications. Am I the only one who feels this way?

No, you're not the only one.

drobbins · 04-28-2008, 12:58 PM

Quote:

However, we dont want to buy in a dead market if in the event we need to sell in 5-7 years, we want to walk away ok with a few bucks, which is how we have always been able to do. Whats the consensus?

If you are takling strictly about investing in a home for profit, I think that would be a hard call for anyone to make, especially with out seeing the specific house in question and with out much knowlege of the local economy. If you need a home, like Eric said, there are a lot of personal factors to consider. I built a house last year and everyone was telling me I was crazy due to the high price of copper and wire. My reply was "when do you expect it to go down - if ever?" I built a very nice house with a nice home theater.

Quote:

Granted, the sky still hasn't fallen, but does anyone think it is possible that the U.S. could in the not too distant future, or is on the verge of suffering some kind of very significant financial collapse? For example, with energy the way it is, I feel that another Katrina scenario could have some very severe economic ramifications. Am I the only one who feels this way? I'm not an expert in this type of thing so I would be interested to hear some other opinions

My house foreclosed in 1995 after loosing job that moved south. In 2001, my retirement was wiped out due to the economic downturn. Yet, still here I am in a nice new house and the family is well. The high price of gas has to have a big effect on all of the economy. I don't understand why the media is not making this a really big issue this election, but thats a different story. I don't think it will be a "very significant financial collapse" though. In general I think the majority of americans will dine out less, or by fewer toys, or car pool

, but our way of life will continue. The economy will always have downturns that we need to live through, but I don't live in fear of them.

DaveF · 04-28-2008, 02:27 PM

Quote:

Originally Posted by WillG

I'm only about to turn 31 so I'm still pretty young in terms of economic awareness. But it can't remember when I've oil and gas prices rise at the rate it has for the last two years or so.

I'm 36. You've never seen this before. I "saw" it when I was 2, during the 1973 oil crisis.

That said, when I graduated college, we were in a recession, and getting a job was tough for various friends. I went to grad school. Finishing grad school, the dot-com bust happened and we were teetering towards another recession -- friends were seeing the end of good times with the Telecom jobs. And now, I'm looking again at the less than optimistic time, at the five-year mark in my career.

Part of me normally concerned. Part of me is still young and invincible. Part of me thinks we're starting something new our nation hasn't quite seen before.

Oh, yeah, Todd -- buy the house if you want it. Don't otherwise. You can't time the bottom of the correction.

Mort Corey · 04-28-2008, 06:25 PM

If you only plan to be in the same location for five years....fagetaboutit. There's more downside vs upside in the near future (IMO of course) What do you do with depreciating money in the interim? Who wants to buy a new tract house in a ghost town subdivision? What if $4 gas is the new bottom wrung?

I've lived in my house for 22 years but don't think I could afford it even at todays depressed prices...at least not when you factor in all the expenses involved in being a self landlord. I expect prices (at least in my area of the country) to go down quite a bit further just to be affordable to the average wage earner.

Mort

Carl Johnson · 04-28-2008, 06:54 PM

When the housing market was on fire the rule of thumb was to buy a house only if you were planning on living in it for five years, because that's about how long it would take to break even when taking into account the cost involved with buying a new home.
What do you base your 5-7 year timeline on? If you have kids in elementary school and don't want to move until the youngest one graduates high school in 2015 then buying a house might be the thing to do. If within the past year you graduated college and started your first real job then buying a house would not be the thing to do.

Dennis Nicholls · 04-28-2008, 08:38 PM

There's lots of daily newsbriefs and talk at the blog over at Housing Crash Continues, Bubble Pops . Even though it started as an SF Bay Aryan site it has stuff from all over the US and other countries now.

5 to 7 years....man that makes it a tough call. I owned my San Jose place for 25 years and became a millionaire when I sold it in May 2006. "Flipping" won't be a good thing in the future IMHO.

KurtEP · 04-28-2008, 08:51 PM

I never understood how this bubble was allowed to happen, especially after the internet thing. As a student of economics, the internet bubble was a classic bubble. The housing thing was exactly the same thing. Are people simply asleep at the switch? During the internet bubble, you could see tech stock picks in popular magazines like FHM. Similarly, there were shows on TV about flipping houses. Prices were irrational. I see the same thing right now in rice and oil. I almost wish I had time to pursue a Ph.D. in Economics just to really understand what is going on here, because there are clearly factors that I'm missing.

That said, if you need a house, buy one. If you want an investment, buy a rental property. Never really understood the primary home as an investment property. You always have to live somewhere. I'd hate to trade down just to make money.

Todd Barattini · 04-29-2008, 06:29 AM

Quote:

Originally Posted by KurtEP

That said, if you need a house, buy one. If you want an investment, buy a rental property.

The home I live in now is my rental/investment home, its a duplex, we plan to rent it out to subsidize our new home, one kid leaves for college in a few weeks, other kid has already been there. In our home buying history of 6 houses, we have always walked away with a nice return but things were never in this condition as they are now.