What a roller coaster we are on....hurricanes, floods, wall street bailouts, presidential politics - it is certainly a very interesting and scary time. At the end of the day, people are trying to sort out what all of this will mean for them and their loved ones.
If you've been thinking about buying or selling real estate, you may feel like a deer in the head lights at this point. So, here is my two cents for any home buyers or sellers.
HOME SELLERS:
If you do not need to sell your home for financial reasons, and it is not a hardship to remain there for the time being, then waiting a while may make sense. Of course, it depends on how long you will be comfortable staying there. I firmly believe that prices are not going to just bounce back up any time soon, and I am usually very optimistic. Up until a couple of weeks ago, I believed that prices were going to just hold steady at the current levels until next Spring or Summer. But now with the recent havoc in the financial markets that is already trickling into every aspect of the economy (companies are cutting back – I’ve heard of some people having to take unpaid furloughs, and other companies postponing start dates for college grads) I am beginning to fear that things may even get worse before they improve. So, if you are content to “ride it out” then that is probably a safe plan.
On the other hand, if you would like to be out of your home within the next 9 - 18 months, I would recommend that you take action sooner rather than later, even if the price is a bit less than what you are hoping for. The only homes that are selling right now are the ones that are priced at the BEST value relative to everything else that is on the market in the same price range. If you bought your home more than 10 years ago, you should still be able to come out ahead of the game, even in today’s market (unless you’ve borrowed a lot of $ against the equity in your home).
The good news is that after we successfully sell your home in the current market, then you have the opportunity to also buy something in this market. There are plenty of properties to choose from, interest rates and prices are low, so you could end up in a very good position overall. Here are some questions for you to consider:
- What are your overall goals with regard to selling your home, regardless of when you do it?
- Where would you go if you did sell your home? What would be the ideal location, size, and type of home?
- Do you want/need to purchase your next home without taking out a mortgage? If yes, how would you do this?
- Does all of the cash for your purchase have to come from the sale of your current home?
The bottom line is this: If you could still meet your goals for your next home in today’s market, is there any other reason that you wouldn’t move forward? The truth is that you could end up with a nice low monthly payment - if you wait until prices increase so that you can get more money on the sale of your home.... you'll pay more on your purchase too.
A big part of my job is to help my clients understand what is going on in the market and show them how to use that information to their benefit. Looking at what you can buy in this market in a given price range will help you understand the realities of the current market much better, than if you just learn about what your current home is worth (and quite honestly, it can make the current prices in this market much more palatable).
HOME BUYERS
I know you're out there somewhere.... If you do not have a home to sell, and you have a strong credit score, and at least 10% for a down payment (20% or more even better), then what are you waiting for??? Interest rates are low, there are plenty of homes to choose from, and prices have dropped considerably.
Will prices go down more? Maybe, maybe not. Unless you are planning to live in your home for less than 5 years, the possibility of a small decline in value during the first 12 months shouldn't be a huge concern. Overall, you need to make a smart purchase decision. Before you fall in love with a home, try to think about how another buyer might look at it. Don't buy a home that is going to be difficult to sell because of a poor location, lack of curb appeal or some other feature that most home buyers expect. For example, on the North Shore where I do most of my business, lack of a basement is a big deal. Most people around here won't buy a home without a basement - homes that don't have a basement always sell for less money than other homes in the same area.
The most important thing for any home buyer today is to talk to at least two lenders or mortgage brokers before you even go out and look at homes. You need to understand what you can afford to buy. It is also a good idea to find out what the lender charges to lower their interest rates. Many people don't know this, but you can pay-down the interest rate on your mortgage - better yet, when you make an offer on a home, ask the seller if they will cover the cost. Often this will allow you to purchase a more expensive home, and still enable the seller a price that works for them.
As always, if you know anyone planning to buy/sell residential real estate, anywhere in the U.S. please get in touch with me. While I work primarily on Chicago's North Shore, I have developed a superb network of agents across the country. I can usually find a great referral for anyone within 24 hours.
Thanks for reading.
nsk
