Sounds harsh, doesn’t it? While this article is particularly poignant for the first time home buyers, there are many lessons that carry over into other sectors of the real estate market as well.
With prices and interest rates so good, some people, even those who are financially stable, are still choosing to “wait.” Why is that?
Here are some of the reasons why people are waiting followed by some of the logic that this article brings into the picture.
Wait until the price drops more. Now suppose you save $30,000 on a given property if you wait for a seller to become more motivated. Now assume every quarter-point change in interest rates is roughly equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed loan. If the interest rate goes up even a quarter point, any potential savings could be lost.
Wait until the property value of my home I need to sell comes back?How many years will it take to rebound? Is it worth it to get out at a loss, make a lateral shift in the market and invest in something that will appreciate faster? Is it possible that you could be waiting 8-10 years at a healthy appreciation rate to get back to that value? Another thing to keep in mind is that many people focus on perceived loss. If they paid $350,000 for the house and at one point is was worth $420,000, if they sell it today for $375,000 have they lost money? Many people feel that they could have sold for $420,000, thus selling at $375,000 would be a “loss.” Luckily in Durango many properties, while they are not valued as high as they were 2 years ago, often are still valued higher than when the homeowner purchased it.
Wait until the market hits bottom? Since we don’t have a crystal ball, we need to use our best judgement on this one. In Durango we know two things. 1. Prices have dropped during the last couple of years, following suit with the national market. They may drop more in the next year or even two. But this brings me to the 2nd thing we know about Durango. 2. Prices will eventually be on the rise again, most likely sooner than later. Ask anyone who lives here. Durango is a destination. We choose to live here because of the community, public schools, natural beauty and lifestyle. When people invest here they are investing in a lifestyle. People will be seeking out Durango for many more years to come.
Take a look at the full article from Business Week. Some interesting food for thought.