the recovery of the Real Estate Market is unfolding exactly as it should and exactly as we have predicted. We are still in “Step 1” of the recovery, which basically is working to sell off the current oversupply of inventory (too many homes for sale). This oversupply is the reason prices have not yet started to rise in many parts of the country.
The number of sales is increasing nicely and that is one way we know the recovery is taking place. When the number of homes for sale reaches a level that results in a 5-6 month supply we will then be back in a “normal” market, instead of the “buyers market” we have had over the last few years. Once we are back in a “normal” market, prices will begin to go up at a healthy rate of about 3% per year (3% appreciation…versus the depreciation we have had). Some other factors that let us know the recovery is under way are the fact that pending home sales (under contracts) are at their highest level since 2007 and prices on average are at 2003 levels (this shows prices have adjusted downward as a result of the oversupply).
on what this all means to you should be your biggest concern and that depends on your point of view.
This all means that your house is worth as much today as it is going to be worth for a while. Prices are not fluctuating by large amounts right now they are either up or down by very small percentages. Even when the market begins to return to normal the gains per year will be small and gradual (1% to3% annually). Some projections say that in the next 18 months there will be an increase in value of 1%… Here’s the perspective you need, if you want to wait for a year and a half for prices to go up the most you would gain is 1%, so if you have a $250,000.00 house you would be waiting 18 months for $2500.00….doesn’t seem worth waiting for, does it? Especially when you consider what your reason for moving is in the first place. If you are moving to be close to your grandchildren is it worth waiting until they are two years old before you are closer to them just so you can have $2500.00 more dollars? Just one example….
There is zero question that now is the time to buy a home. Even if you have a home to sell (see section above about Sellers). The selection of homes is incredible (Buyers benefit from the oversupply because selection is great and prices are great) Also, as of this writing, interest rates for 30 year fixed rate mortgages are 3.59% this is so low it is unheard of….this is what you would call “cheap money”! Don’t wait until the market has recovered because if you do the selection of homes will not be as good, the prices will be higher and the interest rates will be higher….probably much higher.
You should be rejoicing. This kind of market only comes around once in a generation or so. Money is cheap and prices are low. The rental market is extremely strong right now, it’s certainly a “landlords” market. Houses are now cash flowing and showing very good returns on investment. Investors, if you wait, you will miss your best chance at earning the wealth that history proves is best earned in real estate.
In summary, sometimes in life you really have to step back and gain some perspective. Waiting is sometimes the right course of action…as long as you know the value of what you are giving up by waiting….
You may make 1% more or you may lose 1% less but maybe not….the one thing you know for sure is that time waits for no man (or woman) – you can never get today back. You can never spend the time with your grandkids that you’ll miss while you are waiting on a 1% gain to your home’s value. Don’t be the one we have all heard say….”If Only”….
To read this article, and several others on Real Estate, visit the KCM Blog