All I can say is, stay tuned. I think a better question is, “What’s the best strategy to plan a move?” We have anywhere from two to three times normal inventory levels, depending on what part of town you’re considering, or what you define as normal. 2005 levels certainly weren’t “normal”. It’s going to take some time for the smoke to clear. It might be hard to imagine that there is some good news, but there really is. Housing has really gotten too expensive. Sure, it’s nice to be able to cash in on 10% appreciation if you happen to be fortunate enough to be on the right side of the equation. But income simply isn’t keeping pace with home prices. In a rising market, everyone was happy cashing in their equity, but what about the homes they were buying on the other end? They were higher priced as well. So, to keep the payment down, you take that equity and use it, or most of it as a down payment, right? Yes, that equity is there, and belongs to you. But how many people held onto it? Hopefully, you are one of those people. For the rest of you, there are always new opportunities if you willing to invest the time to learn.
Sorry to those of you who bought recently and are going to have to sell in 2007 or 8. Think of it this way. What can you buy these days that holds it’s value? Does that mean that if you want to upgrade that you can’t? No it doesn’t. Unless you refinanced and cashed in your equity. Whatever your reasoning, if you want to move, then falling prices means you can get more for your money when you buy, right?
One fact that is going to stay constant is that the supply of buyers is going to be much smaller for some time. In the Charleston area , prices for a 3 bedroom 2 bath home start around $120,000 for a fixer upper. A 10% down payment is $12,000. With gas prices and prices on everything else going up, this is going to keep the supply of buyers low. The same thing will be true at every other price level. Stiffer lending practices will mean that families that might have upgraded to $600,000 home in Mt. Pleasant might have to stay put, or settle for a less expensive home. Overall, the affect will be lower demand. Supply continues to increase, so that means lower prices. Duh.
So, what’s the best strategy? Why do you need to move? Are you renting and want to start building equity? Do you need more space? First, talk to a local lender. I can refer several. Find out from them the downpayment requirements. If you can meet them, then you have to decide if this is a good time to move, and if so, do you have a home to sell? If so, then you need a complete plan.
If you’re renting, I’d recommend to continue renting another six months to a year. If you hate where you’re living, and you want to buy right now, there is some risk that the market will go down somewhat before it comes back up again. But I don’t think it will be that much. If you’re going to be there for awhile, say at least five years, buying now is relatively safe. Any shorter than that, and it could be tight when you get ready to sell in terms of getting out even or avoiding a loss.
If you have a home to sell, I suggest learning the buyer market for the home you want to buy. Can you get a good enough deal on the buy side to make the transaction work is the question to ask? Don’t make any emotional decisions. Take your time and gather the facts. Do your homework on selling your home. What condition is your home in? Are you prepared to invest the time and money to get it in top condition? And are you prepared to provide the incentive necessary to attract an offer on your home, versus the 5-20 homes that are competing directly against it? Are you looking at the cold hard facts when it comes to your home? Again, you have to take the emotion out of it. You may have spent $10,000 on landscaping, but you can’t expect to get 100% of that back anymore than you would be willing to pay $10,000 more on a home with wonderful landscaping. And you have to be very wary of the agent that is going to tell you what you want to hear to get the listing. The best agents right now are only taking listings they think they can sell, because it costs too much money to market ones that won’t. Weak agents will take anything, because it’s better than having nothing.
The bottom line is, you can make a move work right now to your best advantage. It’s just a lot harder to get all the pieces to line up than it was two years ago. And it’s even more important that you have the right people advising you. I hope this helps some of you. Let me know.