Housing Trends Over the Next Year (Sacramento, Stockton: days on market, sales, real estate)

[nmguy]

Let's say you own an $800k house in a relatively nice neighborhood like Rose Garden, Campbell, or Cambrian Park.

How much will it be worth in 6 months . . . 12 months?

I'm thinking about buying a home pretty soon but have my doubts about taking the plunge.

[sonarrat]

If you're only concerned about the value of a property in 6-12 months, you should never, ever buy property.

[nmguy]

I'm trying to determine, within a reasonable span, when the market will hit bottom and start getting healthy.

This will probably be my last home purchase, and I want to make sure it's a wise one. (I'd like to leave something of value to my two children.)

[socketz]

I'm not sure anyone knows the answer to this question nmguy.

As long as the global economic outlook remains as desparate as it does today, making a large long term purchase like a home would be the furthest thing from my mind, but that's me. However, with that said, I belive if you are long term, say at least 5-7 years, then you will be ok buying in 2009.

I am very confident saying that there will be many more deals out there within the next 1-2 years, so don't get caught in the trap where you try to time the bottom of the RE market. Buy a home because you need one today and plan to live there for a few years.

[AndrewSoss]

NMguy,

I have been advising people to hold off until at least this fall to consider a purchase of a home (assuming they don't have to sell their current home, in which case, it doesn't much matter). As an owner of a Real Estate and Mortgage company in Willow Glen, it pains me to say so (in Realtor 101, it's "ALWAYS" a great time to buy!), but I believe that it's the best long term advice I can give my clients. I have a few reasons for telling clients to hold off

1. 'V' vs. 'L'
With the amount of fear built into the economy, it is unlikely that prices will have a 'V' shaped recovery. In all likelihood, there will be a prolonged period of flatness ('L' shaped') due to restrictions in bank financing. Most of the government intervention programs that would have the ability to cause a 'buying rush' are going to be national and, thus, not apply to the relevant price ranges in the valley. For instance, look at the $8k first-time homebuyer's tax credit. In an area with $80k homes, that's like a free 10% down payment refund. That's going to stimulate the home sales in those areas. Here, it would make a small dent in closing costs, and while nice, isn't going to cause someone to overpay for a home by $50k. (Doesn't stop me from putting it large and in charge on my website tho) :shocked:

2. Price/Rent Ratios
We are still outside of fundamental ratios between rents and mortgage payments. In more outlying areas like the central valley, Hollister, even parts of Gilroy, Mountain House, Tracy, Stockton, North Sacramento all have much better price/rent ratios and the bottom end of those markets are seeing multiple offers and very low days on market (I'm not suggesting you move there, rather I'm just showing you what it would take for us to see a 'bottom' in this area). You still can rent a place for significantly cheaper than you can buy it. It doesn't have to be equivalent because there are some great benefits (monetarily and otherwise) to owning vs. renting, but there has to be some relationship that hasn't (and still doesn't) exist between prices and rents.

3. Further contraction of the credit/mortgage guidelines for any loan larger than $417k plus potentially higher mortgage rates
This one is a double edged sword...further contraction of the guidelines will mean further reductions in prices. However, if you are relying on the current guidelines to qualify (borderline credit, debt to income, low rates), then this may preclude you from being able to purchase, no matter what the price. Assuming that you are abundantly qualified, however, this will help when it comes to prices coming down.

I understand what you are trying to do, and there are a couple ways to look at it. If you are trying to get the absolute lowest possible price on the home that you buy so that you have the max gain when you pass it along to your children, then I would wait.
However, know that waiting carries risks as well. It carries the risk of guidelines changing such that you can't qualify for a mortgage. It also carries risk of rates increasing such that you end up paying more in the long run even at a lower price.
If you are paying cash or putting significant money down, then I think that there is less risk to waiting than there is in buying now.

Every situation is personal and different and different clients have different risk tolerances and goals, which is why I'm still employed and real estate/mortgage transactions aren't done by a robot yet.

Best of luck whatever you end up deciding.

[nmnita]

Originally Posted by nmguy

I'm trying to determine, within a reasonable span, when the market will hit bottom and start getting healthy.

This will probably be my last home purchase, and I want to make sure it's a wise one. (I'd like to leave something of value to my two children.)

I don't think anyone, even the experts have any idea. today it may seem like the bottom has fallen, tommorrow things may turn around or visa versa.

2 years ago did anyone think what is happening was about to happen? Sure most knew the bubble would break sooner or later, but not to this extent..

Nita

[Ludachris]

If this will be your last home purchase, then waiting isn't as important I think since you'll be in it for the long term. You might save $30-50k on something you want, you might not. You might see mortgage rates offset those savings. Another thing to think about is that now is a terrible time to sell, so the homes that are on the market now can likely be had at below asking prices. I'm thinking that sellers are motivated right now otherwise they'd be waiting. Who knows if sellers will be as motivated a year from now.

Andrew makes some good points above.