Why Buy Real Estate Now?|
NOTE: The following are updates (and outlooks) on market conditions - they begin with the most recent and go back. These were written with my Lake Placid/Sebring office in mind, but are fairly applicable to our Sarasota and Estero offices as well.
I may have some people asking why some small-town Florida real estate broker thinks he understands this stuff, so I guess I can only say that writing these types of articles was my job for about 10 years. In fact, I've written more than a thousand market commentaries and investment-education articles for Merrill Lynch, CitiBank, USAA, Chase, BankAmerica, Travelers, CSFB, Schwab and dozens more. Doing that had me continuously and carefully looking at the financial markets. I am also fascinated by investor behavior. So, I think I can provide just a bit of insight.
4th Quarter, 2007/1st Quarter 2008 Outlook - FINALLY: A GREAT Time To Buy!
One of my clients (buying a home this month) just told me: “Everyone says I am crazy.” He wasn’t falling for it, but thought it was funny. We then discussed it in detail. Several people were telling him not to buy now. Yet, these same people would probably have told him to buy in 2005. Hmmm. We looked at all the comparable homes and found the best (by a good margin!). I could have sold the home he is now buying for about 35% higher back then (the MLS sales figures don't lie!). Think about that.
Why take advice from people who are obviously listening to the same news sources and so-called experts that were saying housing wouldn’t ever go down? I constantly was hearing things like: “God isn’t making any more land” and “baby boomers and immigrants - simple demographics - will fuel this boom for years to come.” I shook my head back then. Of course, I DO have proof - The Tampa Tribune interviewed me in May, 2005 because of my investment-writing background when I said it was like musical chairs and to sell now and people were calling ME crazy back then!). Where were all these experts (now saying it’s so bad) in 2005 when people (and banks!) were going crazy? Yes, we were going after listings like crazy and telling clients to SELL NOW - and if they were buying to flip, to be VERY careful and do it quickly and not be greedy and get “caught” (most listened but some didn’t and tell us now they sure wish they did!)
It really was like musical chairs - you simply didn’t want to be the last person standing! People were literally buying homes for 30-50% higher than they can get now in our area and thought that was a GOOD thing? The thing to keep in mind is perspective – something the media forgets about nearly all the time – on the way up and down. If homes have more than doubled in 4 years, and they pull back 30% over a couple years (which people think is such a travesty), that is still a good gain over the time period – unless you bought during the craze and listened to family, friends and the “experts” telling you “you have to get in on this!”
It took a LONG time for sellers - they were stubborn! - to realize that they had to SIGNIFICANTLY reduce prices. Sure, they reduced in the first half of 2007, but don't kid yourselves - it was about 10% on average after approximately a 100% run up over a few years - WOW! Sure, some people really reduced (and those homes sold), but they were a small minority back then (even now, quite a few sellers are still trying to get buyers to make their same mistake - overpaying!).
ALL markets cycle, and you should buy low, sell high. It really is that simple. Now is the time to buy. It wasn’t as good as they said in 2005 (as we all now know) and it isn’t as bad as they have recently been saying (in terms of the market outlook). We’re at or getting near the low – it’s just too hard to time any market exactly and no one knows for sure. But one thing IS certain: You can get a really nice home a LOT cheaper than you could for years. That sure doesn’t sound bad to me! And if you buy to hold for several years, it is VERY unlikely that you won't make out very nicely (form an investment point of view) buying now.
Also keep in mind that our area just doesn’t have the inflated prices people find all over the country. It is relatively cheap. We are on “high ground” (about 80-140 foot above sea level – mountainous for Florida! We’re away from the coast so storms aren’t nearly that much of a concern and we have beautiful, clear swimming lakes with beaches and palm trees – you need to see them to appreciate them! Our taxes and insurance rates are low compared to MANY places and we have a GREAT community.
Second & Third Quarter, 2007 Outlook: “It's A GOOD Time To Buy”
Actually, we see more of the same (from the first quarter) and it getting better for buyers. Prices have been reduced to pre 2005 levels and we can FINALLY say that it’s a GOOD time to buy. The trouble? There are still quite a few sellers who refuse to see the truth (and you need to avoid those homes – and the agents pushing them). However, many more homes are priced very well right now. And these homes are selling well at this point. Smart buyers know it’s their chance to get in cheaper than they have in the past few years and they also know this low end of the market won’t last forever. We anticipate prices stabilizing in our area as we head into next year. We see next year as fairly flat, but some of the “desperate” people may not be there because these will be the lowest priced homes that are selling now and in the next 6-12 months. So many of the best deals could be gone by the middle of next year. We then still see prices turning a little higher from the lows during the next 2-3 years (but taking several years to reach the height - early 2006).
Of course, some sellers are waiting out this low end of the market cycle, but many simply can't afford to wait (investors who bought too many homes, people who bought new homes before they sold, etc.) and they are in trouble now and buyers can get good deals.
First Quarter 07 Outlook
It is finally starting to turn towards a buyer's market and we can begin to recommend to buyers that they should cautiously get into this market - looking only at the very best deals out there (though they are few and far between). Buyers now have a decent selection of homes at decent prices - prices we haven't seen in a while. We think the next twelve months at least are going to present a great opportunity for buyers. They have the chance to get a great home at a good price which can then appreciate in a few years, making it a wise investment in a great community.
It was difficult for us to tell our buyers to wait in 2006, but we did (we really prepared for this crash!). We started to change our tune in early 2007, but still advise caution and "low ball" offers. But many sellers have "seen the light" and have finally made significant reductions. We had some slow months, but we saw the crash coming a LONG time ago (I was first worried in May, 2005). Back then, we advised all our investors to sell - most did and are VERY happy and are starting to buy again at reduced prices - making them even more happy.
Of course, there are many sellers out there who are asking for way too much - there are plenty of dreamers - but there are many homes in all the price ranges priced to sell. Many sellers have suffered and they HAVE to make a move. Many bought or built a home before selling and are really feeling the pinch. Many others were very slow to reduce and now they are in "a bad way" and really need to get out. This, of course, is bad for them and we feel for them, but that is what also creates buying opportunities and selling at a reduced price is much better for them than not selling at all (and, I hate to say it, but it certainly is true that a lot of problems sellers are experiencing comes down to greed and taking trying to take advantage of buyers anyway).
Call: 863-441-2986 or 239-498-9257 OR, TOLL FREE: 877-465-9455 Or, email for more information.
We also have a lot of experience working with investors with things like 1031 (like-kind) exchanges, holding real estate in IRAs and, of course, simply finding the best property at the best price.