It’s a Great Time to Buy…No Really, It Is

I know you are cringing…a real estate agent suggesting that it’s a great time to buy.  But maybe the time has come in Orange County to buy a home or invest in real estate.  Sadly,  after the unfortunate ad campaigns from the National Association of Realtors (N.A.R.) over the last few years, a Realtor touting the “It’s a Great Time to Buy” pitch is met with a fair amount of distrust.

The image in this post is from a 2006 ad campaign from N.A.R. stating ‘It’s a great time to buy or sell a home,’  and sadly states that ‘Prices overall have stabilized’.  We all know how that panned out.  In 2006, it was however, a great time to sell.  Is it ever a good time to both buy and sell?  The reality is that it’s one or the other.

It’s Not a Great Time to Sell

Most homeowners certainly are getting this message. In most cases, those that elect to sell are finding themselves with circumstances that force their hand.  Today’s seller find themselves with no alternative other than to sell, whether it’s significant negative equity position, job loss, divorce, job relocation, or some personal set of circumstances.  In very few cases do we find that they elect to sell today if they don’t have to.  With so many hardship sellers on the market, the downward pressure on pricing continues, making it far from an ideal time to sell.  But for the buyer, this is creating the very environment that makes it a good time to buy.

It’s a Great Time to Buy

Why now?  What makes this particular time to buy attractive?  There are a number of articles talking about the reasons to buy right now but here are a few in particular that I think are worth considering:

  • Prices have taken quite the tumble in Orange County and depending on the area have fallen 25 to  50% from the market highs.  There are good deals to be had in every price range.
  • If you can manage to get a loan, interest rates are still very attractive, for now.
  • Houses love inflation and with a good deal of speculation about the likelihood  for inflationary conditions, we are beginning to see cash purchases are on the rise.  This may be considered an excellent hedge against inflation.

It’s Not Going to Be Easy

The real winner today is clearly the guy with cash.  Cash purchases take out much of the uncertainty in the transaction process.  There is no need for a mandatory appraisal, no underwriters to approve the process, no need to confirm  that the condominium complex complies with FHA guidelines (many don’t), and often cash purchasers have a larger ‘pain threshold’ when it comes to dealing with the cosmetic issues or problems that arise in an inspection.  This puts the cash buyer in an excellent position to negotiate.

Qualifying for a loan today is a far cry from what it was a few years ago.  Buyers will generally have to have great credit, good debt-to-income ratios, documented income, cash reserves, and a solid job history.  While there are still programs for the smaller down payments, like FHA, be prepared to pay for mortgage insurance.  There has never been a more critical time to make sure you are working with a savvy lender.  The documentation required, the tax returns, the bank statements, the investment statements, the verifications of employment and rental history, and potentially the promise of your first born child, will try your patience.

The inventory limited and is often distressed.  Those purchases come with their own hurdles.  Short sales are still a painful and uncertain process.  Bank owned homes currently make up a small portion (2.5 to 10%) of today’s Orange County market. Many homes need some work.

One Last Thing…It’s Not a Good Time to Flip

I wouldn’t plan on buying unless you are willing to own as a long term strategy.  While I think we’ve seen the big fall in prices, there is nothing to say that prices should be considered stable either.  But timing the bottom is tough if you are borrowing money.  If interest rates rise, even if prices decline, the net effect on affordability is a wash.  Find a home that you love, that meets your needs for the long term and get comfy.

 

 

Comments

  1. Chuck says:

    I agree Linsey. My business (investments) involves a lot of research and reading. Most of what I read is very positive from a buyers perspective. Which makes me, as a person holding on to property I would rather sell, optimistic for the future. While it may be a very long time before we see the lofty prices of 5 years ago, most analysts I read are saying we are very near or at the bottom of prices right now. I am hoping I can be patient for a few more years :-)

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