Have you ever found the perfect home, only to have it snatched away from you by another buyer?
In her excellent article, Tara-Nicholle Nelson of Trulia discusses ways to avoid being the victim of a competitive bidding situation. Read Tara’s article here.
Tara makes an important point. MORE →
Q. Have home prices hit rock bottom?
A. Yes. And no.
As most of you know, I’ve been bearish on home prices since 2002, when I first began warning my clients to stay out of real estate investments if at all possible. Sell your home now and rent, I told them. The economic news has continued to be dire since then, and there are few signs of a lasting recovery in sight. And yet, somehow, the stock market has been rising steadily, which bodes well for the real estate market as well. What’s going on?
Certainly there is plenty of reason to fear another downward spiral in prices. The lending environment is, shall we say, challenging. A large proportion of recent sales have been foreclosures and their close cousin, short sales. (A short sale is simply a sale in which the purchase price is not sufficient to pay off the mortgage.) And we can expect wave after wave of foreclosures in the future as people struggle to pay their mortgages while out of work and unable to find jobs. Things look pretty grim. And yet.
And yet, stocks have bounced back strongly from their lows last year. What gives? The Yale economist Robert J. Shiller may have an answer. He suggested recently that home prices aren’t tied so much to economic data as they are to homebuyer sentiment. Indeed, if you ask around, many people are enthusiastic about the prospects for improvement in real estate prices. There seems to be a general sentiment of optimism among people who have been sidelined by falling prices. If enough momentum develops, recovery could become a self-fulfilling prophecy.
In my opinion, it all hinges on whether there are enough buyers who can still afford to get into the market for real estate.
I don’t read the Baltimore Sun, but an alert friend sent me a link to an article that appeared January 12, 2009. The headline was “Baltimore-area home prices fell 3% in 2008.” Gosh. Kinda makes you wonder: Where do they get these numbers from? If anyone reading this blog owns a home in Baltimore that has fallen only 3% in the last year, I’d like to hear from you.
Hey, good news. The world didn’t end last week! Anyone care to guess what the stock market will do next week?
Q: Does your home price hype cycle theory apply to the stock market?
A: We’ll find out next week.
There was, in fact, a headline on the front page of The New York Times on Sunday, October 12: Those with a Sense of History May Find It’s Time to Invest. To my way of thinking, this is the rough equivalent of The Worst is Over. As you know from my previous post, when The New York Times reports the worst is over, the worst is just beginning. It is entirely possible that the stock market continues to drop sharply next week.
Consider another unattributed article from the Times on the same day. This one was quite clever, comparing today’s news to actual quotes from 1929, just moments before the stock market crash. Here are some excerpts from the piece:
From a “Wall Street Analysis” by Thomas C. Shotwell in “The World Almanac for 1929”:
The market is following natural laws of economics and there is no reason why both prosperity and the market should not continue for years at this high level or even higher. MORE →
That was the lead headline that came across my desk today in National Realty News. Here’s an excerpt:
Data through February 2008, released by Standard & Poor’s for its Shiller Home Price Indices, the leading measure of U.S. home prices, show declines in the prices of existing single family homes across the United States worsened in the second month of the new year, with 17 of the 20 now reporting MSAs [Metropolitan Statistical Areas] posting record low annual declines, 10 of which are in double-digits. MORE →
If you’ve been paying attention, you already know my answer: it depends.
Prices are certainly lower than they were two years ago. In some cases, a lot lower. But that old adage still applies: Just because something has fallen in price doesn’t mean it’s cheap. In fact, I believe we have a long way to go before hitting bottom. It may take years for prices to recover. Whether you should buy depends on the answers to quite a few questions, including:
The truth is, buying a home isn’t the right choice for everyone. A good Realtor® will tell you when it isn’t. That’s a sure sign he cares more about helping you in the long term than about making sales in the near term, don’t you think?
And the answer is: it depends.
Clearly this is a difficult time to sell, with prices falling daily. I expect them to continue to fall for some time. Properties that are priced right, expertly marketed, and carefully shepherded to settlement will sell. Most likely they will sell for less than they would have two years ago. A lot less. Should you sell? Maybe. I don’t mean to be vague, but the answer isn’t the same for everyone. What you should do really depends on your particular situation. Some questions that affect the decision are:
I often advise my clients to stay put. It’s certainly not something you expect to hear from your garden variety Realtor®. But then, you didn’t think I was your garden variety Realtor®, did you?
Fact is, I see my job as helping people, not selling homes. Sound corny? OK. I can live with that.
Mike Kupritz is a Baltimore real estate broker who stopped counting after 30 years of experience.
Mike takes pictures. This is a rotating gallery of shots from Baltimore.
