The Perfect Time To Buy Real Estate

There is no such thing, of course. The perfect time to buy would mean that you have all kinds of leverage, and can make sellers give you pretty much the deal you want, but prices are nonetheless rising rapidly so that you will have a large amount of equity the first time you need or want to refinance, or if you need to relocate.

These two conditions never go together. If buyers have all the leverage, as they do right now, they are certainly not going to opt for increasing prices. Sellers can gripe and moan about it all they want, but prices have been decreasing for two years, and they aren't going to go up until all of the extra inventory clears. Supply and Demand. In 2003 and 2004, there might have been 4000 residential properties on the market locally at any one time. As of this morning, there were over 18,000 active listings (When I originally wrote this, it was over 22,000 and I've seen it up to 25,000). That means 14,000 additional sellers are competing for no more than the same number of buyers (fewer by my count). If they don't really want to sell, if they just want to sabotage other sellers by adding to apparent inventory, that's no skin off the buyers' noses. If sellers want to actually sell the property, they've got to compete in order to attract those potential buyers. It's not like buyers just go out there and buy the property whose owner's turn it is to sell. They buy the best property for them at the cheapest price. So sellers can either compete by having a cheaper price, or they can compete by having a better property. Most house bling does not recover the money you spend on it, even in a seller's market, but it might give you the wedge you need to attract a buyer in a buyer's market - provided that your property is no more expensive than the comparables. Most sellers are still in denial about this. They've got something a little bit better than the comparables, they want to ask $50,000 more, and then they wonder why their property isn't selling.

If you're looking for a time when property prices are increasing by twenty percent per year, by all means wait. Those conditions are called "seller's markets," because people who are willing to sell can get buyers to do pretty much everything they want, including pay more than the last seller got. Most sellers want to hold when prices are going like that, and buyers are desperate to acquire. High demand, low supply.

Personally, I think conditions are as good as they get for buyers, especially if you're going to hang around three years or more. Yes, prices have been deflating and you may lose some money on paper for a while - which is completely unimportant if you don't need to sell or refinance. But trying to time the market so that you buy at exactly the moment when it hits bottom is an exercise in futility. Trying to "Time the market," whether stocks, bonds, or real estate, is a recipe for disaster. It's great if it happens, but it's sheer luck, and anyone who tells you different is lying. By the time people realize that prices are really going up again, buyers will come out of the woodwork and we'll be in a seller's market again.

Buyer's markets, where sellers outnumber buyers like they do now, do not last long, in large part due to the fact that once everyone figures out that prices are no longer declining, now everybody suddenly wants to buy. Inventory has usually been shrinking for quite some time before that happens. When I checked this morning local inventory has dropped by 800 units (call it 4 percent) from the last time ten days or so ago.

Buy while the ratio of sellers to buyers is in the thirties, while you can pick and choose your properties, and if one seller won't play ball, the one down the street who's a little more desperate will. If you need some special consideration, like a seller carryback of part of the purchase price, you kind find sellers who will be willing to cooperate because that's the only way they will get the property sold. If you wait until the market heats up and there are only five sellers per buyer, they're a lot more likely to tell you to take a hike with special requests like that. If I want cash, why should I loan it to someone with poor credit money at a below market rate if it's likely that I'll find another buyer in a week?

The time of year may not be optimum. Other things being equal, Christmas season is always the best time of year to shop for a property, because nobody wants to move the Christmas tree. Most people have enough extra stuff going on at Christmas that they don't want to add another major item: buying or selling their home. Those sellers who have their property on the market need to sell. It's spring now - the best time for sellers. But I don't think the market is going to continue to be this favorable for buyers overall if you wait.

Nonetheless, with inventory finally dropping, together with how far it's fallen, as far as supply and demand goes the market is ready to stabilize. Once that happens (a happening about which real statistics are always delayed for months), expect buyers to come out of the woodwork and we'll be off to the races again. The time of best bargains for buyers locally is probably over, and if not, we're at least close to the end.

Caveat Emptor

Original here