Okay so I might not be entirely unbiased but there is no doubt about one thing, real estate is cyclical, and after every down market everyone looks back and wished they had not waited so long to step and reach for their dreams.
According to an old mentor of mine the secret is not ‘”timing the market” but your “time in the market”. By which he means as long as you don’t have a high risk of having to sell under pressure in say 2 years or less, the most important thing is to be on the real estate curve. It doesn’t matter where on the curve you start because over time the appreciation has been consistent and strong.
Even if you want to hedge your risk (and return) you would still be well advised to make that first time home purchase or even better trade up to a bigger more expensive home now if you think there is a good chance of you being there 5 years or more.
If you are considering trading up in house terms, remember that there will always be more downward pressure on sellers of homes that have a lower volume of potential buyers which puts you in a better position to negotiate down on the selling price!
Marcie Geffner of the LA Times wrote:
“What we are finding is fence-sitters,” says Pat “Ziggy” Zicarelli, owner of Style Realty in Tarzana. “Young people, single people, divorced people who need to buy properties are saying, ‘I like that property; however, I’ll wait until the prices come down more.’
A lack of urgency is the chief cause, Zicarelli adds. Buyers know they don’t have to make up their minds quickly, but instead can wait until interest rates and prices come down further.
But “They happen to be guessing right at this point,” advises Zicarelli, who speaks from 33 years’ experience in real estate. True, the market is quiet, he says, but lower home prices and interest rates create “fabulous” opportunities for buyers.
“People are waiting for the market to hit bottom and, then, lo and behold, all of a sudden it’s in the rearview mirror; it has passed them by. You can never buy at the lowest and sell at the highest, unless you just happen to be lucky,” he says.
New Citizen Becomes Happy Homeowner
A case in point is Tatyana Corso, a new U.S. citizen. Corso and her husband, Frank, initially contacted Zicarelli because he was the leasing agent for a house they’d wanted to rent. After some discussion back at his office, he’d suggested Corso might be able to buy a home and connected her to a mortgage broker.
“I said, ‘You should buy rather than rent,’” Zicarelli recalls. “They said they didn’t know if they could afford it. So I said, ‘I have a lender that I work with.’ I called him while they were in my office, and I said, ‘I have a nice couple [here and] I’d like you to pre-qualify them.’ So he called me back and told me what they could do.”
Armed with that information, Corso was ready to act. A 10 percent down payment, stated-income, interest-only, five-year adjustable-rate mortgage, and $405,000 sales price resulted in a payment that was about $50 more per month than the rent would have been on the 1,400-square-foot Reseda residence with a backyard. Corso says she had “only positive feelings” about buying her first house and wasn’t at all worried about price fluctuations. People always need to buy property, and while prices might increase or decrease at times, “it is not forever,” she says.
First-Timer Falls for “Wow! House”
David Clark, a 44-year-old unmarried nurse in Antioch, had barely begun what he expected would be a year-long quest for a home when he called J. Rockcliff REALTORS® in Danville.
REALTOR® John Heywood took Clark’s call on home that was in foreclosure. Coincidentally, Clark had toured a builder’s model of the same house when the community was built seven years earlier. The salesperson had described the model as a “WOW-House,” a turn of phrase that had stuck in Clark’s mind all those years. Within days, he’d decided to purchase the 3,200-square-foot house, which has four bedrooms, two-and-a-half bathrooms, and a loft.
Heywood described Clark as a “savvy buyer.” He knew the house had sold 18 months earlier for almost $800,000, much more than his purchase price of $465,000.
“I wished that I could have bought this house for $400,000 [the builder’s price], so when the opportunity came up again, I thought I would go for it, and I did,” he says.
He cashed out a couple of retirement plans, picked up a gift check from his father, and locked in a 30-year mortgage with a fixed interest rate of 6.25 percent. Being able to buy at a time when buyers weren’t “fighting over houses at high prices” was also a motivation to act quickly, he says.
Clark expects his house to depreciate over the next 6 to 18 months, but believes the value will rebound. Meanwhile, he’s set to enjoy his new tax write-off and a property that’s large enough to accommodate his car, bicycle, motorcycle, and Jet Ski.
Marcie Geffner is a freelance reporter in Los Angeles.
