So what's happening in real estate? From California to Maine and from Maine to Florida there's a storm of bad news and housing problems. The stock market is churning and the bailout situation is confused and uncertain. We have a new president and no one knows what's going to happen.
What does a home buyer do? What does a seller do? Buyers are caught in the conundrum that if they buy, prices might fall further. Sellers are limited by what they owe on their houses -- you can only go so low in price before you have to start thinking about short sale or paying at closing just to get rid of the house.
No one is sure what the value of a home is at this point. I'm going by sales from the last three months but no one knows if prices will fall significantly. It's doubtful that prices will fall much lower in Savannah because of our economy, but it could happen. There is definitely risk buying right now, but how great is the risk? We have a bunch of soldiers coming back to Savannah shortly and they need a place to live. A banker told me the other day that the word from planners to builders is "Don't stop building!"
Will there be more renters? It's hard to tell, but the one year outlook seems to suggest that Savannah will weather the storm better than some. My prediction is that even if prices fall a little bit lower, it's unlikely they will fall below deals that can be made in the present market. Some sellers are giving up on the wished for prices and taking below the present market value. What this means is that in some cases a buyer can get a home for 10 to 15% below what the last three months sales report as the present market value. Will prices fall over 10 to 15 % in the next year? I don't think so. Even if prices fell, say, 6% over the next six months, if you got a deal that was 10% below the present market value, you've done good.
The trick is to find a home in good condition that you can get at a bargain. There's still risk invloved but the risk is lessened the better deal you get. You might have to search a little longer but it will be worth it.
Also, if you are good with renovation, buying a home that needs cosmetic work is still a good strategy, because you can usually get an even better deal on those, especially in this market. If you have to pay someone to do the work, it might not be such a bargain, but it all depends on how low you can buy.
The only problem is that with bargains it limits your options because not everyone can sell at a low price and many sellers don't have to sell, so they can wait it out. So, you might have to settle for a home that's not the perfect choice, maybe a third or fourth choice.
It also pays to talk with a financial manager to determine what effect the tax break on the mortage plays into the decision. If you can get a bargain, then add in the tax break, then compare that to renting, you'll have a better idea regarding the risk in buying. Another thing to keep in mind is how long you plan on living in the home you buy, because the down market will eventually turn around -- if you are going to live in the house for seven years or so, the market will change a lot during that seven years, and in a growing town like Savannah with a diverse economy, it's very likely prices will go up significantly over seven years.
So, for buyers, do your homework and make a decision based on the level of risk. For sellers, sell low if you have to and buy smart on the other end, but if you don't have to sell, then don't.
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December is always a good time to buy a home because the market is slower and you're more likely to get a good deal. Add to that the economy is in a mess and it makes December an even better month to buy. Interest rates are incredibly low right now and sellers are willing to seriously negotiate.
