Why Aren’t the Homebuyers out in Droves?
This may be the best buyers’ market in a decade. Why aren’t the buyers out in droves?
Credit has become important again and not all current buyers have a credit history that will allow them to qualify. Some who would have easily qualified for 100% funding a year ago will find that if they don’t have good credit, they need no longer apply. There are good loan opportunities out there, but most will require solid credit and a good down payment.
Before many become buyers, they need to be successful sellers first. Many prospective sellers owe more on their house than a buyer is willing to pay for it. This happened in a couple of ways. Some people have only lived in the house for a short time and put little to no money down. They haven’t been there long enough for it to appreciate to a level where they will walk away from the closing table with money in hand. In other cases, people have listened to the all the enticing commercials about consolidating debt and every time the house appreciated, they pulled the money out for other purposes instead of letting it grow in value so they could get another home when the time was right.
Buyers are nervous. The media’s evaluation of the current market has created fear. Does anyone have the crystal ball to tell us exactly when we will or have hit bottom? The answer is a resounding “No”. So what if I buy a home today and the values in my neighborhood are going to drop 10%? While that is certainly a possibility, it is extremely unlikely. We won’t know when the bottom has arrived until we are well into the recovery. By that time, a buyer’s opportunity to “buy low” will be limited because prices will have begun the climb and incentives will be shrinking and soon to be gone.
No one can tell us the perfect time to buy, however, with the current conditions, sellers are dropping prices and offering amazing incentives. Sellers are paying buyer closing costs and, in some cases, offering home theaters or furnishings. It wasn’t that long ago where builders had people waiting in line for each house in case the first buyer fell through. There was no negotiating. If you wanted the house, you gave in to builder demands. Today, you’ll get free finished basements, 4% thirty year fixed loans and too many other incentives to list.
Knock, Knock
Who’s there?
A Homebuyer.
A Homebuyer who?
A Homebuyer who recognizes a great buyers’ market.
(The door opens and the buyer walks in.)
Don’t let a great opportunity pass you by.
It seems that now would be a good time to buy investment property as a rental. Prices are lower than they have been in a while and the signs of bottoming out seem to be there, or at least near! The people that cannot buy need to live somewhere.
Joanne- You’re right. Investment property is a great idea during these market correction times. Is it possible to buy a property with cash flow? More so now that in the last couple of years.
Great article and good point about missing the bottom. It seems that much of what is happening in residential real estate (and the mortgage mess) can be traced back to consumers treating their homes like something other than what they really are… good, solid long term investments that you also get the privilege of living in or renting out to cover the costs of the mortgage and expenses.
Real estate remains one of the most reliable investments around this is a great time to buy… at a discount in many markets!
Bob, The lenders have made it so easy to borrow money using a home as collateral that it takes a strong person to look at the long term goal and to turn down the instant dollars. Hopefully, people have learned their lesson with this market downturn. It is a great time to buy.
I enjoyed your perspective, I too think it is time to buy and sell real estate. The market bottom was artificial and due to poor reporting truthfully.
Oh well, I ran over to say you’ve been featured on our site for this week’s Carnival of Real Estate, good job
Steve- Thanks for the comments and the feature. I appreciate your support. It would be an interesting study to see the relationship between the media’s coverage, the statistics and the impact of the reporting on the current market crunch.