Does the Drop in Housing Prices Mean It's Time to Buy?
The headlines have been enough to make potential homeowners think twice.
''Home builder outlook falls to record low''
''Treasury chief: Housing turmoil a 'risk' to economy''
''Forecasts for home sales get gloomier''
''Housing slide yet to hit bottom''
Get the picture?
In 2007, what we read regarding the housing market certainly hasnÃ¢â‚¬â„¢t been good news, keeping some buyers away. Still, real-estate experts said that this might just be a great time to make that big purchase.
''I advise my people that buying a house is not buying stock or something. ... ItÃ¢â‚¬â„¢s a long-term investment, and youÃ¢â‚¬â„¢re looking for a need,'' said Allen Chiang, the chief executive officer of Presidential Real Estate, which has five offices in Southern California, and a member of the board of directors of the Asian Real Estate Association of America. He tells his clients not ''to consider tomorrow itÃ¢â‚¬â„¢s going to be lower or next month. YouÃ¢â‚¬â„¢re not going to sell right away.''
The market is correcting itself after years of perhaps unrealistic and unsustainable appreciation, experts say. That has put sellers who bought at record-high prices or with subprime mortgages in a bind, but Chiang said sellers who have lived in and tended to their homes for several years will enjoy a profit Ã¢â‚¬â€ even if it they donÃ¢â‚¬â„¢t sell at the sky-high prices that were seen a few years ago.
Sellers need to ''go back to reality,'' he said. ''ItÃ¢â‚¬â„¢s real money in their pocket.''
Still, while the headlines have screamed bad times, that isnÃ¢â‚¬â„¢t necessarily going to last.
As far as the mortgage industry goes, conditions are getting better, which could lead to more sales in 2008, according to information released last week by the National Association of Realtors.
Lawrence Yun, NAR senior economist, said in a prepared statement that widening credit availability will help turn around home sales. ''Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,'' he said.
Yun said despite the bad news, 2007 will be the fifth-highest year on record for sales of existing homes.
''Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year -- a lot of people are, in fact, buying homes,'' he said. ''One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.''
Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006. ''A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,'' Yun said.
Duc Nguyen, who sells real estate in the Sarasota and Bradenton, Fla., areas, says he has seen the nervousness among his buyers. But, he says, buyers have opportunities now that they might not have had before to purchase their dream home.
''ItÃ¢â‚¬â„¢s obvious that the prices are dropping,'' he said. ''Those people who want to buy now are better off to look for location. Before the real-estate boom, they were looking for any house in any location.''
But now, both Nguyen and Chiang said, buyers might be able to find a home that is more affordable in a location they have coveted.
''Take advantage,'' Nguyen said. ''Jump into what you really want. Buy for the long run. ItÃ¢â‚¬â„¢s a good time for buyers. I donÃ¢â‚¬â„¢t think thereÃ¢â‚¬â„¢s been a better time in the last few years.''
Nguyen has sold real estate just four years; Chiang has been in the business since 1987 and has weathered the ups and downs of the market.
HeÃ¢â‚¬â„¢s seen people jump in their cars to get to the new listings before others did, watched people settle for houses that werenÃ¢â‚¬â„¢t the right one just so they could buy something.
Times, yes, are different. But that doesnÃ¢â‚¬â„¢t mean the buyers still arenÃ¢â‚¬â„¢t looking.
''IÃ¢â‚¬â„¢ve been showing houses almost seven days a week,'' he said.