Market timing: Is it better to buy now or keep on waiting? [08/16/2008]

By Barbara Ballinger/CTW Features

All the talk about how bad many real-estate markets are has produced a silver lining: a healthy debate on whether it may be a good time to find great bargains and buy. Many eager to purchase a well-priced home or condominium wonder whether the market has reached rock bottom, making it a smart time to invest. Others play devil's advocate and think it may be smarter to wait a bit longer since prices may drop another 10 percent. They surmise that the market may not return to a healthy state until at least 2009 or thereafter.Their claims have evidence. The S&P/Case-Shiller home-price index, which in April dropped 15.3 percent from a year earlier, less than predicted, after a 14.3 percent decline in March; a drop in consumer confidence and a rise in foreclosures; and tougher loan guidelines so some potential buyers can't secure financing , according to Bloomberg.com. In the meantime, most experts say there's no sure-fire way to know if the market has definitely hit its nadir or is still dropping.Yet a growing chorus of experts thinks that even if prices drop more, now is still a smart time to invest. "You're going to sacrifice choice and location if you wait. By the time the market may have hit bottom, the good locations and best values have been sold, including waterfront locations with the best resort-quality amenities," says Philip Spiegelman, founder and chairman of International Sales Group, a sales and marketing organization that represents developers in Aventura, Fla. David Ellis, executive vice president with the Greater Atlanta Home Builders Association, says that the homes that are now selling well are those inside Atlanta's perimeter because they save homeowners time in commuting to work, as well as gasoline money. Homes near Charlotte, N.C., on Lake Norman with good views are selling well, too, and sometimes sight unseen and with healthy cash payments, says Joe Russo, a salesperson with Docks Only Real Estate who is also author of "Selling Your House/Condo in this Housing Emergency of 2008" (Outskirts Press). But just how good have some prices gotten? Jeremy Jones, a salesperson with Distinctive Homes Realty in Fort Lauderdale, Fla., says one house listed at $900,000 in August 2006 sold a year later for $630,000 - a very noteworthy savings. Jones suggests that most potential buyers offer 10 percent less than the listing price. "If the market goes down another 10 percent, then they'll get the house equal to the market decline," he says. Another factor spurring potential homeowners to consider buying now are the lower interest rates, and these may not remain low for long, says Ken Baris, president of Jordan Baris Realtors in West Orange, N.J. "They may climb, and as they go up, the lower prices of the next six to 12 months may be more than eaten up by the higher rates. It may be less expensive to buy today at a lower rate but higher sales price than to buy at a lower price but higher rate tomorrow," Baris says.In addition to lowering prices, some sellers are so eager to sell that they are offering highly creative incentives as bait: luxury automobiles, finished basements, professionally equipped home theaters and vacations to appealing destinations.At the end of the day, experts like Baris say a lower price still is more enticing to most buyers than incentive like trips and autos. "We've heard people ask - even after being offered a car - if we don't take it, how much can we get off the price?' They care about the price more," he says.And once they get into a home, this new crop of buyers remodels but now with an eye toward saving and often with help from eager contractors, says architect Kenneth David Lee whose eponymous firm is based in Encino, Calif. "Many homeowners are being more flexible in their choice of finishes, materials and appliances. They're willing to go with GE Monogram appliances, for example, rather than more expensive Viking, Wolf or Sub-Zero," he says. And many contractors are offering incentives to do the work by cutting fees 6 percent, Lee says.Being a savvy homeowner isn't all about knowing when to buy or how to remodel. Potential buyers should plan to stay at least two years to make the costs of moving and closing worthwhile, says Stacy Francis, a financial planner with Francis Financial in New York. She and her husband Michael recently bought a three-bedroom condo in lower Manhattan. "We bought one close to work so we both can walk and where we can stay with our two-year-old child forever - even if we have another," she says.Finally, buyers should be prudent by heeding, if possible, the following suggestions, offered by Spiegelman, his partner Craig Studnicky, and Francis: Put at least 20 percent down. Avoid "exotic" mortgages that pushed some in the past into the housing market yet got them in trouble by making it too easy to buy with mortgages that sometimes required no down payment. Limit how much of your disposable income you spend on housing, so you have enough for living and saving, with the amount somewhat dependent on the market where you live. Have additional funds for closing costs and attorney expenses. Have an emergency fund of three to six months' worth of cast to cover the cost of living in case you lose your job or housing expenses increase. Do due diligence regarding your community and neighborhood to be sure you get a good long-term value. If you're offered incentives, select ones that relate to the house and will help it increase in value such as a patio or electronics package rather than a car or a trip. CTW Features