I recently recieved a call from a woman who had been working with another agent for a couple of days looking at houses, but wanted my direction about making a decision. Let’s call her Sheila. I could tell that Sheila really wanted to buy, perhaps because of the much larger selection but she informed me that she was only going to be here for two years; and that she wanted to live in Mt. Pleasant. Right now, there is about 14 months of inventory in Mt. Pleasant, and no matter how deep you drill down, all the way to street level, there is a lot of inventory out there. The answer is pretty simple. Unless Sheila enjoys letting strangers come into her house for 6 months, even if the market were such that she could break even, it’s pretty obvious that she needs to rent.
There are a few factors that should go into your decision:
1. The projected three to five year appreciation in the specific part of town in which you’re looking.
2. The projected appreciation for the time you’re considering renting.
3. The current and projected interest rates.
4. The cost of selling your home; including having to move your stuff twice if you aren’t going to be able to get it sold in the right time frame.
5. The amount of time you’re going to be living in the home if you buy.
6. Your complete tax picture.
7. How well you know the area and the local market.
Some people want to wait so they can get to know the area, but mostly becuase they want to reduce their risk. Depending on the answers to the above questions, the cost of waiting to buy, well actually, there could be a benefit to waiting, will vary. Now, I am a local Realtor here in Charleston, so I want you to decide to buy. But the questions are the same…the puzzle is…how to find the answers. The answers are guesses in a few cases. So here’s my take on Charleston….bearing in mind that I make zilch for now if you come here to rent.
Questions 1 and 2. We’re in a temporary stall here in Charelston, not a down market. You will experience solid appreciation here in Charleston if you pick the right neighborhood. If you check the facts, prices are not going down, the are going up in Charleston…still. Even after months of high 6’s interest rates. Now, if you’re talking Mt. Pleasant, things could only go up so high. There had to be a correction at some point. Yet the average sales prices in Mt. Pleasant are still increasing from 2005 to present. If you doubt me, I can send you quite easily, an actual sales and inventory history report directly from the MLS. With the increased inventory, there are definately incidences of motivated buyers selling below market value or reduced prices, no question about it. Sales units are definately down in Mt. Pleasant because the supply of buyers from up North has been choked off a bit from the high 6’s interest rates. But interest rates are in the low 6’s now, so I predict that things will loosen up quite nicely over the summer. Based on market facts, this is a great time to buy in Charleston and to find a good agent to help you get a deal. The first big check mark on the side of buying versus waiting. What’s a good agent? Ask me about my track record recently in negotiating for buyers. It takes a strong stomach to keep looking at houses until we find three to five really good choices to help us negotiate from a stronger position.
Question 3. Interest rates are great right now, in the low 6’s. I’ll leave it to my mortgage cohorts to chime in here if they like. It is decidely unlikely that the rates will go any lower and if so, not by much. This is one big check mark on the side of buying now instead of waiting.
Question 4. This is always a check box for waiting or renting for pretty much everyone. Having your house on the market, when you have a situation that requires you to move is just a very stressful situation. If you are going to have to move in a few years, because your industry, specifically the military, requires it, then this is a reality you have to deal with. The alternative is to spend your entire career and get to your retirement having never had the opportunity to use real estate to gain equity.
Question 5. If you’re only going to be here in Charleston for two years, then you’re probably better off renting for the reasons stated in the example above. If your house doesn’t sell quickly, you could end up holding the bag and loosing money. If you’re going to be here for three years, I think it’s a pretty safe bet. Keep in mind, if the average appreciation is 9%, which it’s been for many years here in Charleston, not everyone gets that. Some people don’t get any, and others get double digits. So make sure you work with someone that knows the in’s and out’s of what’s coming up. And whatever you do, don’t buy from a site or a listing agent. They are hired to work for thier clients, and you are just a customer. Buy through a buyers agent that knows how to measure market trends and can help you gain an advantage. If you’re going to be here for four or more years, then the only thing that’s going to change in the next year is that…well… we really don’t know what interest rates are going to do. And home prices are only going to go up, generally speaking, unless interest rates go up again, in which case you will definately be moving backwards.
Question 6. If you are in the 25% tax bracket, then this is a big check. If not, then it’s a smaller check on the side of buying now.
Question 7. How well you know the area and local market. The papers are always going to print bad news, and most of the real estate agents are going to try to get you to sniff some of their happy gas. Facts are facts. The market is in a temporary stall. Challenge me to back that up with facts, I’ll run you any kind of report for any neighborhood or part of town you’re considering, and either email it to you, or post it right on the blog. Do me a favor, don’t email your question. Post it as a comment on the blog so everyone can see it. Or when you email, let me know if it’s OK for me to copy and paste your question, you don’t have to include your name. Even if I know who you are, I won’t tell, I promise.
Better yet, meet me at my office, look me in the eye, shake my hand, and see if you don’t think I’m someone you can trust.
I remember my Dad telling me this story about how he was renting in Queens, NY and wanted to buy a home on Long Island. He didn’t know Long Island very well, and Long Island is a big place, but he ended up in Freeport. As it turned out, the agent always drove him through the nice neighborhood to get to this really cute little two bedroom house. Just up the street was the pretty rough part of town, which he (and I) found out about a few weeks after we moved in. I got in more fights the three weeks/year I spent with my Dad in NY than the rest of the year in Virginia. Maybe it was my slightly southern accent. They called me “country boy” and never seemed too impressed when I told them I lived 10 miles from the Nation’s Capitol. I asked him last week if it was the agent’s listing, but he didn’t remember. The point is, the agent shafted him to make a sale. I don’t have any idea how long she was in the business, or stayed in the business. Maybe she just needed to make a sale that day to make her house payment, I don’t know.
So maybe you’re thinking the same thing, that you’re going to meet this very friendly person that seems nice enough, but maybe is a little desperate and needs to make a sale. One thing that all real estate agents have in common is that we’re all on 100% commission, and we all have expenses to cover. So there is a conflict of interest from the very start; and I don’t expect that’s going to change anytime soon. I encourage you to speak with my past customers, challenge the facts I present, whatever it takes so that you can get a handle on things. And if you need to take a year to be more comfortable, maybe that could be the best thing for you. I certainly don’t claim to have all the answers, and I certainly don’t have a crystal ball. But I do know that it’s good to make decisions based on all the factors, not just one or two. And the questions hold true no matter where you get the answers. So I hope you’ve found this article helpful. If not, hey I took a shot.