Finding the Bottom of the Market; When Should I Buy?

I just got an email through Redfin channels — an LA Times Opinion piece by Meghan Daum called “Six Months From Never” quoted one of our West Coast bloggers. The gist of Daum’s piece is that the entire industry has been saying “Wait Six Months” for two years now. And housing prices, according to Daum’s research, are down 14.4% from March to March in the last year. But is that wait 6 months to buy, or wait 6 months to sell?

Yes….

Ahem [tugs at collar]. We bought in March of last year, and even though Zillow doesn’t show us as having lost quite that much, it’s still an uncomfortable trend. Except that we’re not here to flip this property — we’re making a life for ourselves in this beautiful little house. We’re willing to wait 6 years — or longer. I hate the weather up here sometimes, but I’m not going to make as much at my day job anywhere else in the country as I do here. For quick turnarounds right now, you’re better off selling short in the stock market — or playing the ponies. Although Cosmo might have something to say to the contrary.

Pam Reynold’s post, Life Inside A Plain White Box, highlights another part of the equation for me. At our last (I hope!) apartment, I took a weedy, untended front yard and did a really professional (if I do say so myself) job of landscaping it. When we moved, the landlord looked at it like it was a pile of rat feces I’d raked together, and made me “clean it up” before I got my security deposit back. I saved about $300 worth of plants, and he has his 3-foot weeds back, so it worked out for everyone. One landlord we met when we first moved in together stipulated that we hang nothing — nothing — on the walls.

My friend A. is dealing with the new owner of her building ripping up her garden to do some orange-mulch “landscaping,” and that following a week of noxious fumes (surprise!) from work being done on the apartment below hers. I’m betting the tenants of that place have a year at most before they’re kicked out to make the flats into condos.

The greatest draw of home ownership for me is the relative self-determination. I’m not naive enough to say you can’t put a price on that, but so far we haven’t spent $18,200 renting someone else’s place, either, and I can call the cops on anyone who vandalizes my garden.

What I’d add to the discussion is this: if you want to buy cheap, now is the time. If you want to buy “at the bottom” because you’re afraid of “losing” money, listen to what Patrick Lashinsky has to say in that same article:

“If you find a home that has everything you want, why wait six months so you can save $5,000? As for the bottom of the market, I wouldn’t sell my house right now unless I absolutely had to, because I’d be competing with bank-owned properties that are being sold at really low prices.”

If you can buy, this is a great time to do it. And new blood is what is going to make this market rebound. The fact that this house lost over $100,000 in value between 2005 and 2007 is the sole reason we were able to buy it. We can’t have it both ways — you can’t buy on the downturn and expect immediate returns (but you can look to all of those foreclosures as cautionary tales — keep your old car, keep your credit cards in a drawer, and don’t blow money on expensive new appliances).

And, well — don’t sell. The glut of homes on the market is what is driving prices down, and that’s going to continue for a while. Avoid foreclosure at almost any cost. Go bankrupt, get rid of the new car — whatever it takes. Losing your house to abandon your top-heavy mortgage will cost you a fortune over time; it probably isn’t worth it. If you’re keeping your expensive SUV and losing your house, like one couple I met recently, seek counseling.

Does anyone have a story about saving their home — something to lighten up the gloom about foreclosures with a happy (anonymous) comment post?

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