By Kay Wilson-Bolton
July 6, 2006
County-wide real estate brokers are reporting slower home sales this year. After years of record-breaking levels of home sales activity, the market is poised for a slowdown. With this in mind, it is tempting to wait until “things settle down” before buying a home.
Real estate sales activity is cyclical. When buyer demand is high, interest rates are low and the supply of homes for sale is low, home prices tend to rise. In this sort of market, buyers are eager to buy. The problem is finding a place to buy when demand outpaces supply, and it probably won’t be along the Coast of Ventura County.
When home sales slow down, the supply of homes for sale tends to rise and, this can lead to a softening in home prices.
The concern today is that home prices have risen significantly in many areas over the past five years. During the same period of time, interest rates dropped to multi-decade lows. Recently, rates began to rise. What happens to the real estate market if interest rates continue to climb?
The answer to that depends on the economic situation in ou locale.
As the national economy picks up, interest rates will rise, hiring will hopefully improve and, if so, household incomes should grow. Unless interest rates rise rapidly, increasing incomes should make up for the decrease in housing affordability.
However, if the local economy lags behind the national economic recovery, we could be faced with higher interest rates, which mean higher housing costs except for decreased prices, at the same time that the average local income is static or declining. In this situation, home prices could drop, particularly if there’s a glut of inventory on the market.
To ensure that you don’t over-pay at a precarious time in the housing cycle, take stock of the local housing market and economy, as well as your personal financial situation. Your local REALTOR® real estate can provide you with valuable information about your housing market.
Be sure and talk tomore than one lender who can help you work through a purchasing program when you can qualify for a better loan by asking the seller to pay some of your closing costs which in today’s market place, equates to a price reduction.
How long is it taking homes to sell? Is this more or less time than it took homes to sell a year ago? How long would it take to sell off the entire inventory?
Our local economy is good. The balance of jobs to housing is good. Taking stock of that along with your personal financial situation will help with that decision.
There’s no harm buying at the high point in a market cycle as long as you’re not forced to sell when the market is down. If you have any concerns about the stability of your employment, this may not be a good time to buy.
Timing markets is difficult. Some people wait to buy until all the conditions are right, which you may not know until after the fact. You could miss opportunities if you wait too long.
The right time to buy is when you have financial security; you can afford to buy; you find the right house; and you know that you won’t have to move again for 5 to 10 years.