When is a good time to buy?

16 Responses to “When is a good time to buy?”

1. Spud 19. Jul, 2010 at 5:18 pm #

   A previous post summed it up best when they said that when the bears are at full voice and doom is the order of the day – that is the time to start looking at purchasing. Anyone who has followed the success of Warren Buffet would subscribe to this. If you follow the populist view then you end up buying high and selling low.
2. steven 19. Jul, 2010 at 6:30 pm #

   Even if you subscribe to that theory it’s very difficult to know when the bears are at full voice.

   I think the time to buy is when nobody is talking about buying/selling real estate. When the market has been stagnant for so long that no even pays attention anymore. When nobody can even remember the last boom or even dream of it happening again.

   That would have you buying in the early 2000s
   • Spud 19. Jul, 2010 at 7:57 pm #

     Steven, there is a whole industry around real estate that will never allow there to be silence.
     IMO I think the bears are pretty noisy right now.
3. Prof ANON 20. Jul, 2010 at 9:52 am #

   I don’t think that the questions you pose (and the way you asked them) capture the whole story. For example, there are circumstances that could create high prices and high inventory (e.g., April and May of this year in virtually all major Canadian cities), and there are circumstances that could create very low prices with very high inventory (e.g., practically all of Arizona).

   Essentially, you have presented your questions in a way the presents key variables as being independent (unrelated) and dichotomos (either-or), when if fact they are interrelated and continuous.

   IMHO, the question of personal utility is probably the single most important factor in the sell/buy equation.

   My girlfriend and don’t attach value to owning things. So the real estate buy question is decided by: how long we intend on living in a place, what is the price of rent, and what are likely future price trends for buying (as determined by a variety of factors including employment, demography, availabillit of credit, current months of inventory). We currently rent a place for at the low end of the market (even though we have a combined income of about $180,000 a year) and will likely continue to rent unless housing prices drop by about 20%.

   Someone else, might see owning a home as an importan life milestone. Get a girl/boyfriend, go to prom, graduate highschool, go to college, get a job, buy a house, and breed. They don’t consider themselves fulfilled until the check the boxes. Others see owning a house as a form of social status. While still others feel that owning a home is part of creating a sense of place and control. These folks are likely to buy the nicest house that they can afford as long as general market sentiment is pretty good. They will start to restrict their purchase decision as general market sentiment becomes more negative.
   • Smokey 21. Jul, 2010 at 2:07 pm #

     Prof,

     If a recession did not drop prices 20 percent, what is going to cause this correction. I ask because I like to know if you had some insight that I have never concidered.

     I do not see a house as milestone either. I see a house as an investment first, and a place to rest my head second. (Donèt tell my wife, she likes her house) I have never made your kinda dollars, but I have invested a fair amount in real estate. Maybe your well invested in all sortsa things, but why would you not consider real estate a good long term investment. Owning a house may mean nothing in terms of value to you and your significant other, but why not as a long term investment.
4. Sasquatch 20. Jul, 2010 at 10:52 am #

   Prof ANON makes a good point, life circumstances may be most instumental in making a decision to buy or sell. I just got a raise, Buy! I just lost my job, Sell! For me personally we will look to buy a house once we have children (the school board may force me to move to the ‘burbs as many of the schools around me have closed or are under review ).

   I don’t know what criteria you’d apply to determine when the bears cry the loudest…they have been doing so for years…and the bulls have been bullish for the same amount of time (so they are both wrong half the time). Really it’s when the right house is available at the right price…also when the Realtor’s association says “buy now or be priced out forever” it’s generally a harbinger of immenient price declines.
5. Young guy 20. Jul, 2010 at 2:42 pm #

   IF your older than 55 by the time you pay it off.. E.g.: your about 30 yrs old and you can only qualify for a 35 year mortgage, or a 30 yr mortgage at that rate… its NOT a good time to buy.
6. Larry 20. Jul, 2010 at 6:49 pm #

   Bulls, Bears and Pigeons deliver messages.

   Many such messages are esoteric numbers that lean this way or that and are dependent on the economic/statistical flavour of the day. In the majority, the numbers are reflective of historical fact and not progressive except via quicksand speculation of what might be.

   While numbers are great and provide much entertainment in discussion, alone, they lack the intrinsic understanding of the innate pressure felt by many who desire to have a roof to keep their head dry and a warm hearth to come home to.

   Simply, from a long term perspective of value received via ownership, the right time to buy a home is any time you need one and can comfortably afford to pay for it.
   • Prof. ANON 20. Jul, 2010 at 9:19 pm #

     @Larry

     I know I’m being a little flippant when I say this (apologies), but I like snickers bars and can comfortably afford to buy a couple every week at $100 a piece. I’m still not paying over $5.00 (for an extra large one at a movie theatre).

     Currently you can buy homes in Hawaii for cheaper than you can in Edmonton. Just saying….
7. Larry 20. Jul, 2010 at 9:42 pm #

   @Prof. Anon

   True enough! You could do that in Strathmore as well I suspect. Don’t know if they have a movie theatre.
8. underfloor heating 21. Jul, 2010 at 12:55 am #

   Yeah,it’s generally a harbinger of immenient price declines.
9. Ian 21. Jul, 2010 at 5:41 pm #

   Cheaper in Hawaii? I’m calling Bull****. Don’t know where you were looking but that got my attention. Seeing as Florida and Arizona are in fact down recently and my wife has been talking about buying a vacation property I thought I’d look but I seriously can’t find anything cheaper than Edmonton, looked on MLS and found this little gem for 150k US, no utilities , just a sleeping platform and its tiny, 125 square feet, so comparing apples to apples I’m pretty sure you can get a 10 by 12.5 foot garden shed on a 12000 square foot unserviced lot in the edmonton area for less than 150K US.
   http://www.mauirealestate.net/GetSearch.php?WhatMLS=343234
   Outside of that only two properties priced at 250K us or less in Maui, 5 properties returned at 350K us or less. I think I’ll stop there since the average in Edmonton is currently around 325K.
   Now throw into the mix employment opportunities for Canadian visitors to Hawaii, should a person buy and move there as opposed to Edmonton and the possible scenario of non-resident owners having to pay much, much higher property taxes under regimes such as those set up in Canmore Alberta to erode the affordability of the typical non-retired Canadian and I think your candy bar argument is about as soft as the Snickers bar I left out in the sun today.
   Just saying.
   • Prof. ANON 21. Jul, 2010 at 6:40 pm #

     Really?

     http://www.realtor.com/realestateandhomes-search/Hawaii_HI/price-na-325000?sby=2

     Maybe some of the square footage is smaller than Edmonton. But, yes, you can buy a reasonable house in Hawaii for $325,000.
     • Ian 21. Jul, 2010 at 9:04 pm #

       Nice, found me a sweet one in Pahoa hi, on one acre for 250K us…but at the same time a search for houses in Edmonton less than 225Kcdn yielded 109 results. Granted those 109 results are likely not in neighbourhoods anyone would want to live in and in condition opposite new show home. Not to be ridiculous, I will take a decent house in Hawaii over a mansion in Edmonton, or for that matter anywhere in Canada any day of the week. Median income in Pahoa is less than the Hawaiian median income which looks to be significantly less than average income in Edmonton even when you factor in exchange, and the median price for Pahoa is 418K…tells me that this little gem has something wrong with it when it is on an acre of land surrounded by other homes bringing the average up to nearly double that. Could it be a bad neighborhood (bad neighborhoods in Canada are nothing compared to bad neighbourhoods in the Fantastic States of America), legal issues with the house, there has to be some reason someone is trying to unload this thing for nearly 200 Grand less than the community average. But the serious problem is, how do I immigrate to Hawaii, buy a house, find a job and afford any mortgage payment in Hawaii since I am a Canadian citizen and can’t go there to work except illegally. So its just not an argument, I could show you homes in New York, Monaco or Moscow that are cheaper than Edmonton, but that doesn’t mean anything for way too many reasons. You don’t say to someone contemplating purchasing a home in the city they live, work or have family in, “Don’t do it, you can buy the same thing and have better scenery 8000 miles away!”
       Personally, I think you buy a home when you want to put down roots, and you can afford it…and by afford it I mean that it isn’t going to be an albatross if interest rates rise a little, or you find yourself unemployed for three months. For most people it is one of the only ways to accumulate a reasonable amount of wealth for the future. Yes there are better vehicles for your money, but next to nobody is disciplined enough or has enough time to educate themselves on these investments. A mortgage payment is a way of permanently acquiring one of the requirements of living, shelter, with a built in penalty for not being disciplined enough to pay the bank.
       • Prof ANON 22. Jul, 2010 at 11:31 am #

         I agree with almost every single point you’ve made, and I acknowledged that my reasons for purchasing a home would be much different than a lot of folks in my original post. For some, owning a home has intrinsic value. Others, would never save if they were not forced to by a mortgage payment.

         I just think there is something fudamentally wrong when a market like Hawaii (that is desirable to high income people/investors across the globe) even comes close to comparing to a market like Edmonton.

         I also wish there was a way to find the average home price, downpayment, income, and mortgage terms for all FIRST time home buyers for the last four years. I suspect that there are a lot of folks with the potential Albatross you describe….
10. Bill from Tauranga Real Estate 29. Jul, 2010 at 11:00 pm #

    How quickly and easily a property sells and for how much is often dependant on: the state of the housing market, mortgage interest rates, and the local/national economy. Any one of these factors can affect buyer demand and selling prices.

    However, to a large extent, both the buyer and seller can adapt or react to market conditions.

    Selling your home in a buoyant real estate market should be relatively easy, regardless of its location or condition, as long as you hire a competent agent and price the property correctly.