I am totally perplexed by the housing market these days. I find myself asking questions such as: Are prices still declining? Are inventories declining? When will values begin to rise? In essence: have we bottomed?
My suspicion is, despite popular demand, there is not a simple answer. I still think there are major discrepancies between different sectors of the market. Single-family homes inventories are declining but condominiums may not be. Luxury home values may decline more while the rest of the market may have leveled. There continues to be a huge difference between different areas. Mature markets will continue to behave more consistently than markets with hyper growth.
There are certainly some positive statistics, most notably sales of new homes rose nearly 10 percent in July. However, there is some conflicting data regarding the accuracy of those numbers. In addition, foreclosures have continued to rise, up nearly 7 percent in July. So again, what does this all mean?
Low interest rates and tax incentives to first-time homebuyers have helped fuel a limited recovery. I wouldn’t crack open the champagne bottles yet. We may be close to the bottom but a climb seems far off.
In general, I believe buying a home is a qualitative not quantitative decision - I think this is even truer today. In this market, one should not buy a home simply because they perceive a market low. You can still rent for a huge discount relative to a purchase. In addition, a purchase has significant transaction cost on both the acquisition and disposition.
Typically a good rule of thumb is if you know you will be in a home for less than 3 years, rent. If you will be somewhere over 3 years, buy. I would be more conservative today. The new rule: one should be confident they will be somewhere for more than 5 years before purchasing.
Yes, there seemingly are buying opportunities in the market. Yet, you should still be cautious.
The train is far from leaving the station.
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