Waiting Costs Money in Real Estate (Sarasota: sales, 2014, to rent)

[dpbarr2000]

I just did an analysis of median sales prices for 2014. In Sarasota County, if you've been looking around or waiting to buy for whatever reason, that waiting is going to cost you.

The median sales price of a single family home in Sarasota County increased to $195,000 in 2014, up from $155,000 in 2012. Median condo sale prices increased $32,000 in the same period.

I can understand the desire of some to rent for a while before buying, but when you combine the lost money on rent and the ever increasing cost of housing in the area, waiting is going to cost you even more.

[bbronston]

Just a suggestion but our association publishes the same analysis each month so you might save yourself the time.

[Sunshine Rules]

Originally Posted by bbronston

Just a suggestion but our association publishes the same analysis each month so you might save yourself the time.

My thoughts as well.

[Cardiff by the Sea]

dpbarr I tend agree with you. While I don't think the totally clueless who have never lived here should buy unless that have done tons of research, I do agree with you that in an up market it is better to buy sooner than later. But people who are unsure about where to buy face very stiff transaction costs if they buy, then hate it, and have to sell. Buying a house just because it is a hot market would be a risky gamble. A house is first a place to live and second a LONG term investment that shouldn't be overly influenced by short term considerations.

I am shocked how much prices have gone up in the last year. According to the always authoritative source, Zillow, (just joking), prices are up 14% over the previous year in a couple of the zip codes I follow. All the properties that looked affordable last spring and summer are gone. Pickings look real slim in the entry level market.

House prices are influenced by (1) supply and demand and (2) borrowing costs and (3) inflation in builders costs.

I personally think demand will continue to rise as population projections are up and retiring boomers are cashing out up north and moving here. If demand continues strong, prices go up.

Mortgage rates are likely to increase at some point because of the federal reserve has stopped quantitative easing. But a lot of purchases in Sarasota are cash purchases so that may not matter much. So will rising interest rates hold down the price increases caused by rising demand and limited supply? Who knows?

Will builders add too much to the supply like in the last bubble? Will the increasing costs builders are paying for materials and labor bring that new supply in at a significantly higher price? Will people balk at those higher prices putting a restraint on once-burned/twice-shy builders?

The big caveat is no one rings a bell at the top of the market. And it is hard to predict when it will be. When we were selling our CA property last spring, the market was white hot. A year latter, prices are down for no apparent reason and our real estate connections out there describe things as slow.

It is always better to buy at the bottom, but I think that was 2012. Second best time to buy is in the middle, which could be now. The worst time to buy is at the top. The problem is that the top could also be now, but not likely IMHO, because of the boomer driven demand I see in the near future.

So dpbarr, after all this musing and with many disclaimers, I agree with you. And Ben, feel free to bash me too for giving investment advice.

[beninfl]

I cant bash you for giving investment advice, Cardiff. You don't have a bone in the game. But for dpbarr, someone trying to sell real estate -- he has a direct benefit from people following his advice -- he makes money.

(Plus, you're usually right and honest, too).

[La-La land]

But waiting long enough can pay off. My personal take is that real estate is cyclical every 7 years or so, and we're in about year 4. As to cash buyers, why would anyone not borrow money at 2.8%? If you're investments can make even 3 or 4% it's cheaper to borrow than to pay cash.

[Cardiff by the Sea]

Originally Posted by La-La land

But waiting long enough can pay off. My personal take is that real estate is cyclical every 7 years or so, and we're in about year 4. As to cash buyers, why would anyone not borrow money at 2.8%? If you're investments can make even 3 or 4% it's cheaper to borrow than to pay cash.

Very true for cash buyers. Sadly in the current environment, it is primarily people who don't need loans that can get them. Lending requirements are strangling those who need them.

Waiting 3-4-5 years for the next real estate crash works for those making a discretionary purchase, but for those who need a place to live--not so much.

[gypsychic]

The bottom here was definitely 2011 - 2012. I am not a realtor nor an investor, but as a homeowner who bought in 2008, on the way down, I have seen what has happened. That time was an anomaly and I don't ever expect to see it again. Prices in my neighborhood are now at their actual worth, and sales have been VERY healthy. If someone needs a place to live I see no benefit to waiting. This (Sarasota) is and always has been a desirable area.

[gomet]

Originally Posted by gypsychic

The bottom here was definitely 2011 - 2012. I am not a realtor nor an investor, but as a homeowner who bought in 2008, on the way down, I have seen what has happened. That time was an anomaly and I don't ever expect to see it again. Prices in my neighborhood are now at their actual worth, and sales have been VERY healthy. If someone needs a place to live I see no benefit to waiting. This (Sarasota) is and always has been a desirable area.

Word Up!

[1insider]

I don't doubt that prices are rising but using the median to prove it is disingenuous. The median is a misleading metric and is often used for self-serving purposes which is why real estate agents and organizations like it. The median can rise with declining prices and prices can rise with a declining median. Consider the following simple examples of five hypothetical sales per year. It works the same with any number of sales.

Year 3 had a lower median than Year 1 or 2 yet had higher selling prices.

_Year 1 __Year 2 __Year 3
250,000__ 240,000__ 260,000
250,000__ 240,000__ 260,000
195,000__ 195,000__ 155,000 this is the median for each year
125,000__ 115,000__ 110,000
125,000__ 115,000__ 110,000