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Don’t Buy A Home in Your Rear View Mirror
By Ryan Ward | January 19, 2008
Many buyers today do not see the value available in today’s real estate market or listen too closely to what they here on news reports to see the advantage presented in today’s market. Some buyers do see this for what it is and will ultimately reap the largest benefits. Fundamentally, if you put much stock in what you hear pundits on TV and radio say, you will likely have missed the best opportunities available in years. Don’t buy a home in your rear view mirror.
The reasons for this is because of the way market statistics are reported. We can only report factually on what has already happened so by the time you hear that market has improved, you have already missed the best time to buy.So, instead of looking for what happened in your rear view window, look at what is in front of us currently. Let’s start with some of the very basic buying real estate fundamentals.
Fundamentals For Buying Real Estate
A look at the fundamentals of buying real estate provides an excellent baseline by which we should view this market. These principles apply in any market and are very timely now.
- Determine if you want to or need to buy
- Determine if interest rates are favorable
- Plan for the long term (5 years minimum)
- Determine your wants/needs
- Find out what you can afford.
- Assess the supply of homes
- Assess current and past trends - try to go back a minimum of two years and if available find market statistics for 5 years.
Let’s look at These Issue Individually:
The first issue is a basic assessment of your motivation to buy. Are you motivated by a desire for a bigger home, keeping up with the Jones’s, placing your children in better school districts or have you truly outgrown your home and need more space.
Interest rates - As of today a 30 year fixed rate loan is under 5.5%. It really doesn’t ever get much better than this.
Plan to stay for more than two years. In all but the very best real estate markets (which don’t generally last very long) you will need to be in a home for at least two years to be able to sell your home without bringing money to the table so don’t move with the idea that in 18 months you will simply be able to sell and move on to something else.
Before you begin your search, you need to have some principled ideas of what you want and/or can live with. Changing what you want in the middle of the process can cause conflicting emotional distractions that sideline your ability to make sound decisions.
Now that you know why and what you want you need to know what you can afford. There’s no point to wasting anyone’s time on things that you cannot afford, although you may want to see a couple of homes above your price point to help assess the value of what you ultimately buy.
Now it’s time to address the real estate market. For this you need to know the supply of homes, days on market and where prices are, have been and where they are heading.
What Does This Mean For You in Today’s Market
The part that we, as real estate agents, can help you the most is finding properties that meet your criteria and making sense of the real estate market.
Making Sense of the Current Real Estate Market
This is where you don’t want to get sucked in to the media hype. The truth is that these guys on TV and radio talk about a very much meaningless real estate market on a national level. Unless you are buying a home on a national level (which you are not), what they say doesn’t mean much. Another important point is that when they tell you about the market they are actually telling you what has already happened by looking in their rear view mirror. This is because statistics  are a historical account of the market, not a current or future picture.
Ryan Ward,
404.630.3187
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