Buy A House Now, Or Wait For Prices to
Fall Some More?
By June Fletcher
Question: Is now a good time to buy a home, or should I wait for prices to
fall further?
-- Everybody, Everywhere
Everybody: With the housing market on life support, just about everyone
I talk to these days is asking some version of this question. So rather
than answering for one person in a specific market, I'll tackle the issue
generically.
Nineteen
months past its peak, residential real estate continues to weaken, with
prices and sales down and inventories rising across the U.S. For sellers,
this is ghastly news, of course, but buyers have mixed feelings. On the
one hand, after years of bidding wars, instant offers without home
inspections and even penning poems to convince sellers to hand over the
keys, it's delightful to finally have choices and negotiating room. On the
other hand, it's a bit frightening to make a commitment now, when there's
a chance that prices could drop even lower.
Caught between
opportunity and risk, what's a buyer to do? Here are some ideas to keep in
mind in our current "buyer's market":
Buyers, not sellers, set prices.
This may seem
counterintuitive, but all a seller can do is suggest an asking price. The
real price is whatever a buyer pays for it.
In 2004 and
2005, home prices rose because buyers flooded the market -- now prices
are falling because buyers are sitting on the sidelines. Meanwhile, the
number of homes being built hasn't changed drastically; rather, supply is
growing because existing-home sellers can't figure out what buyers are now
willing to pay, so their homes are sitting on the market.
Comps may not matter now. When markets are in upheaval, either up or down,
recent sales of comparable houses are of less value than they are in more
stable times. So take a look at public records, which are now often listed
on Web sites, as well as Internet tools like Zillow and Trulia. But take
them all with a grain of salt. They may be guiding sellers as they set
their asking prices, but they don't necessarily indicate what a seller
will accept, since the market is in flux.
Timing the market isn't possible.
Although many
economists predict that nationally, housing still has a way to go to reach
bottom, you don't have to wait for that to happen to get a good deal. In
fact, it's better to buy when housing is trending down than when it
reaches the floor, since at that exact moment, the balance of power begins
to shift toward the seller again. So if you see a house you like and can
afford, make a bid now. And don't worry about insulting sellers with a
"lowball" offer. They may be desperate to move because of a new job,
marriage, divorce, overstretched bank account or other motive. Yours may
be the only bid they've received in months and they may be very glad to
have it.
-- June Fletcher is a staff reporter at The Wall Street Journal and
the author of "House Poor" (Harper Collins, 2005).
