Pin the Tail on the Bottom of the Market!

All of us Realtors have been working with would be home buyers here in Santa Cruz. It seems all of them feel that they should wait until the housing market is at the bottom before they buy a home. Let’s look at an interesting take on "the bottom of the market" and how it will effect your buying decision....









This is a graph that represents the Santa Cruz housing market. The left side of the V represents the market going down, the right side represents the market going up, and of course the bottom of the V represents the bottom of the housing market.





If I asked you to plot on this

graph where you thought the housing

market was right now ...












... would you pick this spot or something close?



So you think that the market is going towards the bottom. If the market isn't at the bottom yet, how will you know when it does hit the bottom?

How will you know when the housing market hits the bottom?

Experience tells us you won't know that the housing market has hit the bottom until prices start to go back up. It will be difficult to be sure that the market has hit bottom for a few months. It’s not a sudden shift, it’s a gradual shift. You'll be able to tell that the market has turned when prices reach this point (green arrow).




What is the difference in housing prices between the red arrow and the green arrow?

Not much... but there is another difference: a major difference.

If you buy a home on the left side of the graph, it is considered a buyers market. You would be more likely to get concessions from a seller including price reductions, repairs, upgrades, closing costs, maybe even personal property.

If you wait until the market turns and you buy on the upswing, you and every other buyer that has been waiting for the market to hit bottom will be bidding on the same house.

There really is no better time to buy a house than now, and here are some reasons why:

1. There is a wonderful selection of homes to choose from right now.
2. Sellers are very willing to negotiate on price, terms and perks.
3. Interest rates are still at a historical low.

I'm suggesting we take a good look at the above examples and decide what percentage the prices will have to drop before a buyer thinks housing prices have hit bottom, and then offer that price. For example, if you think that prices will go down another 5%, then submit an offer at 5% below the asking price. Sellers will either counter, accept or decline. Then look at a loan payment based on current low interest rates. On an $875,000 home with an accepted offer 5% below asking, you'd end up at $831,250. Putting 20% down ($166,250) your loan would be $665,000. At 6% payments would run $3,325. If interest rates were to go up only half a point to 6.5%, the same home with the same $166,250 down would have to sell for $797,000 to end up with a similar loan payment.

The message here is to take advantage of the market today! Opportunity is knocking now!