Buying in a soft market
The slowing of home sales is projected to result in lower home prices in 2007, particularly in the Northeast, Florida and California.
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KAI RYSSDAL: We've got great reporters here. They go out and really dig into their stories. Sometimes they experience the story first hand. Janet Babin did a piece for us a couple months ago about the housing market
JANET BABIN: I own an historic five bedroom home on a quiet street, about 10 minutes from downtown Cleveland. I've spent thousands restoring the house. Problem is, no one's lived in the house since last October, when I moved to another city and put it up for sale.
We're happy to tell you Janet finally sold that house after months and months of waiting. Now she's gone from seller to potential buyer and according to some real estate experts, there's no better time to purchase a home. The market is soft. Buyers have bargaining power. So why does our reporter feel so uneasy? Janet fills us in from North Carolina Public Radio.
BABIN: I relocated to this area about a year ago and only recently sold my house in Cleveland. Meantime I've been renting here in North Carolina.
I'd say I barely broke even on the sale of my house, so at this point, after all that, some friends wonder why I'd even think about buying another house. But they don't have to come home to this every night:
[ "Meow . . . meow . . ." ]
That's my cat Bam. He's very upset. He can't stand apartment living because he can't go outside for late-night kitty prowls. Not that that's the only reason we'd buy a house. There's the furniture: All the stuff that didn't fit in my apartment is in this heatless garage getting moldy.
Kitty and moldy furniture aside, it is reportedly a great time to buy a house.
The National Association of Realtors certainly thinks so. It just started a $1.5 million ad campaign to tell would-be buyers like me that this is our moment in the sun.
Pat Vredevoogd-Combs is president of the NAR:
PAT VREDEVOOGD-COMBS: "There are quite a few houses available. There's loads of opportunity for people to get into the marketplace who haven't had a chance to do that in the past years."
So after some serious cognitive dissonance -- you know only fitting things into your brain that match your desires -- I made an offer on a solar contemporary, for about $20,000 less than the asking price.
The seller turned me down. At first she didn't even counter offer.
As I pondered whether to keep trying, I started asked the question a lot of potential home buyers are asking themselves these days: What if the market hasn't hit bottom yet?
Economist David Wyss at Standard & Poors says it's a good question.
DAVID WYSS: "I think the only con of buying now is it may be cheaper in the future. If prices are going down then you may be better off waiting for a year until the prices come down. Frankly I wouldn't gamble on that with a primary residence."
He says that's because the best time to buy a house is whenever you want and need one. Still, Wyss says home prices are only half way to the bottom in many markets.
A recent study from Moody's Economy.com predicted that median prices for existing homes will fall next year by an average of 3.5 percent. That would be the first such decline in home prices since the Great Depression.
So there's a chance that even if I pay a fair price for my home now, I could be sitting on a loss by next year.
But Colby Sambrotto with the website ForSaleByOwner.com says I need to be more Zen about it.
COLBY SAMBROTTO: "Real estate is really worth what someone's willing to pay for it. There's no standard yardstick that can be used ultimately to measure the value of a property."
Here's another way to think about it, from JoEllen Mason with Prudential Carolinas Realty:
JOELLEN MASON: "OK, now when we go to sell this house, what kinds of things are you going be hearing at that time. Is this going to be a hard house to sell?"
The house I want could be a hard sell. Maybe that's why the owner decided to counter my offer and drop her price $15,000. Still not satisfied, I countered again.
Six days later I was at my realtor Barry Slobin's home when the phone rang:
BARRY SLOBIN: "Yes, hi Don how are you? That's good news Don . . . Thank you. Laughter, that's amazing . . .that's amazing . . ."
I got the house. My husband and I were thrilled. But then, that little voice in the back of my head kicked in. I wondered, would I have gotten a better deal if we'd waited?
Then I reminded myself, we just bought a house . . . and the cat will be happy.
In Durham, North Carolina, I'm Janet Babin for Marketplace Money.