Have real estate prices bottomed out or are we about to see a further collapse? What about mortgage rates, what will they look like in a year or two?
Fact: It depends totally on where you are.
Opinion: Prices have a bit further to fall in the areas that never boomed. In CA, FL, and other boom areas, you’ve got another 20-30% to fall. And far more widespread foreclosures. And massive amounts of personal and corporate bankruptcies ahead.
Are these general questions or are you personally interested in purchasing real estate?
A bit of both. I’m genuinely curious because the state of the housing market is in the news moreor less all the time, but I’m also gathering information in case I have to move for work within the next 6 months or so. Of course, in that case, I’ll have to buy a house regardless of where prices are, unless they’ll let me sleep under a desk. Also, I’ve been thinking about the feasibility of buying a condo to rent out in a resort-type area, the idea being that those sorts of properties might be selling cheaply now.
Realtor chiming in. I would agree with this.
I’d break it down a lot further than regional or state, or even the county level. For instance, in our area, most of us in the industry in our market think that we hit bottom on the entry level houses last year, but some segments of our market might still have some room to drop a bit more. I don’t think anybody here thinks we have another 20-30% to drop in any segment locally, but then we were out ahead of this decline and have already seen most properties drop half or more of their value from the peak.
I don’t know if interest rates are going to jump a lot, but they can’t stay where they are forever. The median interest rate over the past 30 or so years was somewhere in the 8.5% range. I don’t think we’re going back there real soon, but I doubt that we’ll stay this low over the long haul.
Of course, if the employment picture gets a lot worse and/or the financial system has a total meltdown much worse than what we saw a year or so ago, all bets are off.
THIS is what concerns me: we have a depressed real estate market and extremely LOW mortgage rates. When rates rise, property values will take another dive.
I have been looking at real estate, as an investment…and I’m not sure the time is right, yet.
If the market’s still falling, renting for a while may actually save you money.
Real estate purchases are not like other investments. For your primary residence, you have a place to live for your money, and if you never sell and you can afford the mortgage, how much the price of your house goes up and down doesn’t really matter. Getting into the market in the first place is a more interesting story; it gets more complicated with issues like renting while you wait for prices to come down, but maybe they go up instead. Also, while you’re renting, you’re not paying on your house; one way of looking at it is that rent is just gone instead of going towards equity. I think your best bet is to start keeping an eye on the market where you’re going to be living. Being informed should give you a good idea of how things are going.
Generally speaking, it’s a good time to buy. It may not be the very bestest time to buy, but you probably aren’t going to be able to time the market perfectly anyway.
If it were me and I was going to either buy and keep for more than five years or so or keep renting, I’d definitely buy. Prices are good - who cares if they’re the absolute bestest ever? There’s no point in worrying about imaginary money, and there are benefits to ownership beyond “where in the cycle did you buy”.
Now, if you’ll need to move for work in two years, that’s different.
Nobody knows whether prices have hit bottom or not, either on a local scale or nationwide. Anyone who says that now is a good time to buy is simply an optimist. As prices have fallen over the last few years, many people have declared that the market has bottomed at various points. They were all wrong. The same thing happened in the stock market. The Dow topped out at 14,000. When it dropped to 13,000 people started saying that “stocks are on sale” and that “it’s a buying opportunity”. They said the same at 12,000, 11,000, and 10,000. They stopped saying it for awhile after it fell from there. They were finally right when it fell another few thousand points.
If anyone knew with any certainty where prices would go from here, the market would take that information into account and prices would adjust. You never have any assurances that you are buying at the bottom. You only have guesses. You have to decide whether you can afford the risk of guessing incorrectly.
I’ll admit to being an optimist - it’s an occupational hazard. And I’ll concede that you can’t know for sure what any market is going to do, because there are a lot of moving parts at play here. But there’s a difference between a guess, an educated guess, and a wild-ass guess. For my specific market, here’s why my educated guess is that we’ve hit bottom:
We have a shortage of homes on the market, and we don’t have a big wave of foreclosures on the way locally like you might be reading about in the national media. Right now, we’ve had 4 straight quarters of flat values in our most active market segment (entry level houses), and virtually every decently priced property that comes on the market gets multiple offers within a few days. Investors have jumped all over this market, with 20% of our sales over the past year being all cash deals. 53% of our sold units in the last year sold for at or above the asking price.
We aren’t going to see the rapid spike in prices that we saw a handful of years ago. A lot of that was fueled by a lending environment that was way, way too lax. We aren’t going to see those days again for a very long time.
Could our market still totally tank? Sure it could. The economy as a whole could still totally tank, and we could head into a period of 25-30% unemployment, see the financial markets fall completely off a cliff, have some cataclysmic natural disaster, or any number of things could happen. I don’t think those things are likely, and even if one or more of them come to pass, quite frankly the value of your house probably isn’t going to be a primary concern anymore.
Your market might be very different. You’re going to want to do some research on what’s happening locally. If it looks like you still have a pile of foreclosures coming locally, or if you still have a market with 8-12 months of inventory, you might be a ways from the bottom. The bottom line here, as far as I can see is that you need to take a good hard look at this. If it looks like our market, buy. I did that myself last year. If it looks shaky, wait.
You have asked two questions. Have prices bottomed out and is it a good time to buy real estate. The answer to both questions is not the same.
All things held equal, its a better time to buy real estate than it was 18 months ago and its probably moderately better than buying real estate 18 months from now. However, all things are not equal and all buyers are not equal. The question should be, is it a good time for you to buy real estate.
If you are looking to invest in it, then it probably a reasonably good time. Mortgage rates are low. If you can deal with giving a month or so free to attract a tenant, then you should be ok. You probably shouldn’t expect a lot in terms of capital gains but you can do ok in income if you buy right.
If you are looking to live in the real estate, then you should consider whether you really want it and can really afford it.
If you are planning on moving in less than five years, I wouldn’t expect to make any money on your sale, but you probably won’t lose anything. It still could be more than the cost of renting. Depends on where you are.
If you lose your job, would you and your family be destitute in less than six months? If so, then you probably can’t afford it. I don’t care how cheap it seems.
Can you afford the maintenance, property tax and insurance in addition to the monthly P&I? If not, then its a lousy time to buy real estate.
Bottom line is that a house is not your investment, it is your home. If you like it, can afford it and are confident in your ability to continue to afford it, then its a good time to buy a house. If you buy a house and the market value goes down, but you are planning on staying there and you can easily afford the payments even in a time of distress then why would you care if the value decreased?
If you are buying it because it sounds like a good idea now that real estate prices are lower, but you can’t really afford all that goes into it, then it isn’t a good time to buy real estate. If you lost your job and didn’t have any savings and the bank foreclosed on you, would it really matter if the market value increased?
If you ask your neighborhood realtor, its a wonderful time to buy real estate. Apparently, it was a great time to buy real estate in late 2007 because prices were going nowhere but up. Then it was a great time to buy real estate in mid-2008 because prices had fallen by 20%. Of course they tell you that its a great time to buy real estate now because prices in some markets have fallen by 50% or more. They were just kidding before.
My 2 cents.
Look at the rent that you can get on a house. If you put 20% down will it positive cash flow? If not it may be overpriced for the area. Before the crash in San Jose it took 50 to 60% down. To me that means either rentss are too low, prices too high , or both.
The investment house I purchased for $250,000 should rent on open market for $1800/ month. In 2007 it sold for $585,000 and rent probably would have been $1200/month.
Like houses are now being picked up for over $310,000 with multiply offers.
If you finances are in order now is the time to buy in some places. Of course if the economy goes totally belly up, then all bets are off.
A good quote from the most conservative investors is “I won’t buy until there’s blood in the streets.”
The streets, they are a bleedin’. Home values have dropped more than ever before in humanity’s history. Property values in fucking Paris during the blitz didn’t drop as much as they did here in the past three years. The median home costs less than the average luxury car. Home values cannot collapse anymore, because there is nothing left to “collapse”. The median household annual income is higher than the median home value in many places. It’s completely ridiculous, and irrational in the extreme. Year old houses are selling for less than the timber and copper used in their construction. This is it. Seriously, if you have money, buy right now. Preferably in Las Vegas on the east side, near Sunrise Mountain. Please. 
I lived on Sunrise back in the 80s / early 90s. I had business in Vegas a few months ago, so I stopped by the old homestead to see how it had aged.
A house down my old street was for sale. By coincidence, it had also been for sale back when I sold my house in '94. I remember it, and it’s price then, because it had been my main competition.
The asking price now was 10% less than the price then, 16 years ago. I went online & the pix of the place showed they’d put in a new kitchen recently too.
Sunrise be dying. The rest of Vegas apparently isn’t doing much better.
Actually, that is not true.
The Las Vegas Journal just announced last week that new home sales were higher than home foreclosures last month, for the first time in a very long time.
I am not saying all is rosy, but it does seem like things might be looking up a bit at least.
If I had the cash, I would most certainly buy a house now. Homes that were going for 500,000 a few years ago can be snapped up for about 180,000 now. Sounds like a deal to me.
In the past I knew of investors that were buying houses and waiting for the price to go up. But in the mean time they could not find any renters. To me that ment there were more houses than was needed. A case of over supply. With over supply I do not see how value can do anything but go down.
the first time owner tax break of 10% (of the value of the house) up to $8,000 is about to expire so someone starting out in a stable job should factor this in. This includes prior home owners who’ve been out of a house for 3 years.
Down to what? A dollar? Eighty cents?