WHY NOW IS A SMART TIME TO BUY
Courtesy of John L. Scott
Current as of January, 2008
Considering all of the negative press the housing market received in late 2007,
it’s more important than ever for buyers to separate fact from fiction when
deciding on a time to buy a home. This document is intended to help home buyers
assess the facts of the real estate market objectively.
ABOUT INVENTORY
FACT: The housing market is undergoing a natural cyclical correction.
It’s impossible to ignore the ongoing news surrounding the downturn of the housing cycle.
The recent “housing boom,” which lasted from 2001 to 2005, was caused by low interest
rates and a rapid increase in property valuations, resulting in high numbers of renters
opting to buy. Three factors caused this decade’s housing boom to spiral upwards: 1) a runup
in home price valuations that spurred a high sense of urgency in home buying and
selling; 2) poor lending practices, which caused many homebuyers to secure loans that
they ultimately couldn’t afford over the long term; and 3) speculative purchases of homes
also increased, with buyers investing in real estate with the hope of a quick return-oninvestment.
Like the dot com bust, the housing market has begun to correct itself after a number of
years of unwise purchasing, but unlike what the media would have us believe, a correction
in the housing market doesn’t equate to a crash. Unfortunately, the ongoing negative
news about the troubled areas in the U.S. has caused a ripple effect, with home buyers and
sellers on a national level exercising caution before making a decision. This has caused an
overall slowdown in the marketplace. The National Association of REALTOR®’s Chief
Economist, Lawrence Yun projects that nationally, the “median existing-home price will
drop about 1.7 percent this year.” Yun goes on to explain that “This is a small, minor
adjustment after a strong run-up in housing prices.”
True, the number of homes sold in 2007 will have dropped from the year before, but 2007
is still among the highest years on record, with numbers of sales for both 2007 and 2008
projected to be even higher than the levels seen in 2002. (Figure 1) |
