From NorthJersey.Com. Hat tip to New Jersey Real Estate Report
House-hunters Play Waiting Game
David DeFabiis of Hackensack has been house-hunting for more than a year.
He’s got a good job, a great credit score, a sizable down payment. He’s been prequalified for a mortgage.
But he’s afraid.
“I’m afraid that a house I buy today will not be worth what I paid down the road,” he said. “I am concerned [about whether] I should play the waiting game some more.”
DeFabiis represents a new breed of house-hunter: the fence-sitter. In a National Association of Realtors survey this spring, 20 percent of Realtors said they have potential buyers waiting it out.
“They’re a very big percentage of home buyers now, people waiting for the market to hit bottom,” said Dianna Ivanov of Terrie O’Connor Realtors in Ramsey. “We have a standard Realtor phrase: ‘You don’t know when the market has hit bottom until prices start rising.’ “
I’m on the fence with Dave here. While I’m not saying that I’m waiting for market to hit absolute bottom, I would like to have some idea where the bottom is before I jump.
The idea of buying a house and then having it lose 10% of its value is disturbing, but acceptable. The idea of it losing 30% is frightening. The former mean losing a portion of my investment should things go south early on in the loan. The latter means that, if the house needs to be sold for some emergency reason, I lose my entire investment and then some. Plus, even if that never happenes. It’s unlikely that I’ll ever actually “earn out” on that investment, given inflation and the lost opportunity cost of the downpayment.
Do home prices in a desirable community like Babylon Village really have a 30% drop left in them. I’m sure I don’t know. But the concept is very disturbing.
As much as I’d like a house right now, I think I’m going to hang out on the fence with Dave for a while.
“As much as I’d like a house right now, I think I’m going to hang out on the fence with Dave for a while.”
Or as I told a close relative recently “Not buying a house in 2005 is the best financial decision I have made in my life, including my decision to [enter a well-paying career] when you net out the cost of school.” That decision alone has “saved” or rather “made” me about $200,000 (calculated as war chest amassed by renting in the interim + depreciation of the typical house in that time).
The thing is the kids. Your first one, until they are mobile (crawling, walking), just stay where you put them, and living arrangements aren’t altered TOO radically. After that, bets are off. Figure you have a year or so before that comes to bear. My oldest is now at the age (3-1/2) that having a yard to run around in would be a benefit. Not quite a $200,000 benefit (as in I don’t regret not buying because s/he doesn’t have a yard), but needing to consider alternative to waiting another year without a Spring; with Ma and Pa baby boomer desperately clinging to their champage retirement dreams on their beer retirement savings (“But… what about all our home equity!?!” — pack the house with you and take it to North Carolina). Well, I’ll be sure to write a nice letter to the Newsday, et al. on my anticipated departure. Declining fortunes are not the time to double down; its the time to take your money off the table, and bet the minimum until the cards turn your way again.