Posted

FAQ’s

I am a buyer—should I just wait?

No! Rates are again at historically lows and will remain around this level through at least the middle of the year. They are expected to increase eventually and Buyers will then lose buying power. Every 1-percentage point increase (from 3.5% to 4.5%) will increase the cost of owning a house by about 10% (since the monthly payments increase by about 10%). 

I am a buyer—what if I just wait until the next recession is over?

Theoretically a good idea. BUT the next recession will be a correction, NOT a collapse we experienced 10 years ago. We have low unemployment, banks with stronger balance sheets and healthy, tight lending standards. This time banks will not collapse and will not drag down the housing market. The sales pace is slowing down but our tight inventory will not allow for prices to free fall. Economists say that the next correction is still a few years out in which the housing market is expected to correct itself  s-l-o-w-l-y  this time. If a good school system is the reason for a purchase, children may have graduated by the time the correction is over.

But won’t home prices be lower after the next correction?

Yes, home prices will decline during a correction. But until then they will still climb. Home owners will immediately benefit from still slowly rising home values, paying down principal, tax deductions and not to mention from the desired quality life as a home owner in the desired area. And again, any past ‘regular’ correction brought a 10% value decline and not around 30% as the last time. So buy now but buy smart!

What if I time my purchase with the next correction/recession?

Predicting the end of the correction is almost impossible. It is always a rear-view mirror event in which we realize that the correction/recession ended … at least 6 months later. A buyer would loose out on paying down principal for many years.

What does that all mean for me if I am a Seller?

List soon – price right! As buying power diminishes, buyers get more price sensitive, resulting in lack of urgency and fewer multiple offers. No time to “test the market” now. Statistics in NJ show that a house priced right will achieve its fair market value and possibly more because of the low inventory! But the same house priced higher by 4%+ than fair market value will need to drop the asking price at least once, creating more bargaining power for the buyer, which results in lower offers. Delaying a sale by that long could entail unforeseen major home repairs for a seller.