Reasons to Buy Later
Most buyers have become used to the idea of just hanging around and waiting for prices to go lower. As a matter of fact, most buyers have been waiting for so long, that they’ve developed a new habit of “Not Buying.” Let’s look at why waiting to buy is still a great idea:
- Interest Rates are still at near historical lows and are almost guaranteed to go up – Why buy now when you can pay $60.00 more for every $1,000.00 you finance, for every 1% in interest rate increase. Better yet, you can pay all this money to your favorite people, the bank for the next 30 years! We all know that in this economy nobody wants to save money.
- Rental Rates are jumping up – As rental properties are being gobbled up, rents are going higher and higher. By the time most tenants realize they’re throwing their money away, they’ll have to spend a lot more on real estate. Also, as rental rates increase, property becomes a better investment and the pool of Buyers expands. Besides, everyone knows the great sense of pride we have when we can tell people they, “Rent”, or that “I’m a tenant”. And, who wants to lose that? Besides, isn’t it almost as much fun to give the money to a greedy landlord as it is to give it to the bank?
- The best way to lose money and opportunity is to “follow the crowd”– Why buy now when you can wait until the best-priced and most desirable properties are all gone. Wouldn’t it be better to wait until you can get “left-overs”?
- Supply has stabilized or is going down – In many neighborhoods, we have already seen a significant reduction in the number of homes available for sale. This foreshadows what will be happening in the rest of the market. We all like to wait until we can’t get what we want, so we should just wait a little longer. Think about how much fun it will be to complain for the next 10 years about what we missed.
- Demand has increased significantly for all price points – As “Pent-Up” Buyer Demand is released, and all those buyers re-enter the market competition will become fierce. Imagine how much fun it will soon be to fight with all of these buyers, just a little longer and you can have more fun than you could at a carnival!
- Price Per Square Foot is increasing– Recent trends indicate that the price per square foot is going up. If you can just hold out a little longer, you’ll finally be able to get rid of all that extra cash that’s been lying around. (Yay!)
- The New Construction or Replacement Cost vs. Existing Home Yield Curve has never been greater – The best way to determine whether you’re getting a “deal” in Real Estate is to look at the difference in prices between the purchase price of the home versus the cost to replace the home. For example, if you can buy your home for $75.00 per square foot including the lot, and the cost to build the same home in a similar neighborhood is $200.00, the yield would be $125.00. Once the economy improves and they begin building homes again, prices are guaranteed to increase. Buyers are likely to get significant appreciation benefit from the difference or yield curve. But, who wants to make money?
- The Economy is improving– Most important economic indicators are showing signs that the economy is either leveling off or improving. These include a drop in unemployment, strong corporate earnings, and increased manufacturing. Once again, if we can just wait a little longer…we can get less and pay lots more!
- The Stock Market has had explosive growth. – Let’s see, the Dow was down to a low of 6,547, on March 9th, 2009. Investors that had the foresight to jump in when the Dow was at even 8,000 (or 20% higher than the low) have made piles of money in a short period of time. If we applied the same formula to real estate, the value of having too many homes for too few buyers dropped home prices by 40%. What would it mean to a “Now Buyer” if a similar recovery happened in real estate? Life could get boring. Let’s just wait until we can take lots more risk for a lot less return. After all, we could all use a little more stress, right?
- 10. Owning a home is the Great American Dream– Many experts have implied that there is a paradigm shift in the way people view owning real estate and it will be less important to people to actually own their own home. These experts completely overlook human motivation. For centuries and even millennia, human beings have been willing to kill each other and destroy entire civilizations for little patches of land. The American Dream will always be to “want” things, especially a home. But, then again who wants to achieve a dream. After all, we all can agree that happiness is over-rated, right?
This could be the best opportunity we’ve ever had, or ever will have, to realize our dreams and secure our future happiness. The time is now! (Or should I just wait?-Hah!)