North Sound Property News

As I posted elsewhere, the market in Mukilteo and Everett is taking a beating.   Prices are sticky on the way down (not much movement there) but sales have slowed down, while listings and market time continue to rise.

 We are truly in a buyer’s market now.

And yet, the ironic thing about a buyer’s market is that it is the kind of market when it is most difficult for buyers to decide whether they should buy or not.  After all, there is the fear that if the market is going to come down further than it has done, you might lose money.  Fear rules.  It ruled when buyers were worried about being priced out, and it will rule if buyers are worried about depreciation.

So, I want to review a few ideas for people who are thinking of buying but aren’t sure how to know when it’s time to make their move.  The right time to buy is when:

1.)  You’re ready to buy.  This means, you can afford a home on a fully amortized loan.  Now, you don’t have to actually buy using a fully amortized loan, but you should be able to qualify using one.  And from what I’m hearing there may not be that much benefit to going with an adjustable product versus a fixed.  The difference in rates isn’t that great at the moment so it may make sense in the current climate to go with a fully amortized fixed rate.  In my opinion, if you decide to go adjustable, you should try for the longest adjustment period possible.  Maybe Jen can cover this in more detail, but I think it’s important in the current market to avoid having to refinance within the next few years.

 2.) You plan to own the home over the long term.  We have had a heck of an appreciation party in the last 4 years and there is going to be a hangover.  That means, if you buy today there is a risk that you could be in trouble if you have to sell in the short term.  The conventional wisdom has always said that you should wait to buy if you are not planning to be in the home for at least 5 years.  Things can come up that might change your plans, but you should not be expecting to buy today and sell in two without it costing you.

 3.) You understand that the real beauty of owning versus renting–assuming a 30 year fixed rate loan–is that if you buy a house today, you chip away at that initial loan over 30 years and one day when the loan is paid off, you make no more payments.  With all the cash out refinancing people have been doing over the last few years, it seems people have forgotten this simple fact.  Rents may go up or down, but rents will never go to zero.  Someday, the payment on your mortgage will, however.  Prices for housing and everything else may escalate or decline, but your payment stays the same (on a fixed rate) until one day there are no more payments.  This is one reason to buy now rather than wait 2 or 3 years–you’re 2 or 3 years closer to that glorious day of making no more payments.

 4.) You’re ready for the commitment of owning a home.  Unlike renting, you’re responsible to make repairs if they are needed.  Just like renting, you have to make the payments every month.  You need to be prepared in case your personal circumstances change.  Sometimes if you have a nice landlord you can tell them your situation has changed and they’ll let you be late with the rent.  The bank is not going to be so understanding.  If you are late, you’re in default.   This is why it is important to buy a home you can afford, and to have reserve funds (6 months is a good guideline) saved in case of job loss, illness or other financial problems that may occur.

 5.) You understand that owning a home is not a risk-free ticket to the appreciation gravy train.  You always assume the risk that prices could go up or they could go down.  You will have to pay the mortgage regardless.  The Big Question here is: is this house worth to you what you are paying for it?  I’m not talking inherent value, I’m talking, are you comfortable paying the price for this house today knowing that things may change in the future?  They might change for the better (as they have historically done) or they might change for the worse.  That’s the risk involved with making the commitment to own.

 6.) Unless this is an investment property, you understand that a home CAN be an investment, but first and foremost it is a home. 

The likelihood is that the current market is a short-term thing, a correction that will itself correct in time, and the home you buy will show reasonable appreciation over time.  This is the historical trend–although as we are seeing, it’s not an endless rocket ride to the moon, or even necessarily a yo-yo on a staircase.  Real estate prices can go up and down, and if you are comfortable with and understand that fact, there is not really that much to fear in buying a home today versus waiting until things are more stable. 

Sandy

About the Author: Sandy Kaduce is Associate Broker of Gallery Homes Real Estate. She serves buyers and sellers in North King and South Snohomish counties. She is 2009 Board President of the Mukilteo Chamber of Commerce, as well as Vice President of Site Selection for Habitat for Humanity of Snohomish County. For more information, visit Sandy on the web at www.sandykaduce.com! Read more from this author