Buyer (Still) Beware
We warn once again that it will not be a buyer’s market into perpetuity, though others have a different opinion. Some forecasters – Goldman Sachs being the most prominent – project the Federal Reserve will hold the fed funds rate low for “many years” in order to help U.S. consumers and companies pull out of their funk. If that were the case, then it would appear that mortgages rates ranging between 4.5% and 5.5% could be the norm deep into 2011.
Meanwhile, Reuters reports that homebuyers are still negotiating good discounts based on data released in July’s Zillow Real Estate Market Report. Zillow notes that buyers paid 3.3%, or nearly $7,039, less than the last listing price on homes for sale during July. What’s more, 22.8% of all homes listed for sale on Zillow during August were listed for a median 96 days, up from 91 in July.
It sounds like the trend will remain the buyer’s friend through 2011 – until you dig a little deeper. Zillow also noted that the 3.3% discount is down from June’s 3.5% discount and substantially down from January’s 4.6% discount. It is also worth noting, yet again, that the usual hard-hit burgs in Nevada , Florida and California skew the data.
“Even if prices stabilize and rise, we can still finance at cheaper rates,” so the counter argument goes. Yes, that is the case today, but we think Goldman and others are underestimating how quickly an economy can turn and how quickly inflation can conflate. It is a buyers’ market today, so buyers should take advantage of it today. As for tomorrow? We are much less sure.
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4 Responses to “Buyer (Still) Beware”
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Dean,
Thanks for your thoughtful post and I 100% agree with all the points who brought up.
One in particular stands out is that how fast the market changes and you don’t know it has changed until it has! Amen!
I can think of numerous instances of markets changing so fast and clients saying “I wish I would have….”. The early 80’s, late 80’s, early 90’s, the period after 9/11/01, all come to mind.
Never try to second guess the market, make your move when all the facts work in your favor!
Brian
Great prices, great rates = great time to buy!
Dean, I keep telling buyers that is is a buyer freindly market. Fortunately, many are taking advantage of this. A friend of mine bought his house several years ago at an interest rate of 14%. He has refinanced and now pays only 4.5%. I’m not an economist, but hope to see the buyer friendly trend for a little longer.
Shokoofeh
Dean,
A home purchase should be thought as long term. So if they buy with today’s low rates they are set for hte next 30 years. These are record lows. Take advantage of the record low interest rate and record low Bay Area Home Prices. When I give Home Buying Seminars I tell people today is like the “Day after Xmas Sale”. When I purchased my home in 1982 I paid 14% interest. Wow1 What a deal today is. What other industry will hold their price for the next 30 years. Incredible. Today is “The Perfect Storm”
Lee