This came in as an “Ask the Broker” question, but it’s really a wide open pitch for any informed observer. (That would be you.)
So should second-home buyers buy now, or wait? Will lending rates go lower soon? Or is this the time to strike?
Have at it, if you like, but back it up with a reasoned argument. I have no idea where our interlocutor is located, so respond for your own market.
My own take: If you’re willing to buy aggressively and hold for at least three years — five would be better — this might be the ideal time to buy a turn-key home in the Phoenix area. Values could continue to slip over the short-run, but interest rates are unlikely to stay this low in the long-run. Waiting out the bottom on price could result in a worse buy overall, where hammering hard now on price while rates are still very low could put you in an excellent position to prosper when values start to rise again. Nota bene: Never invest money you can’t afford to lose.
Technorati Tags: real estate, real estate marketing
Kevin Boer says:
I’ll take a stab at answering this for your Bay Area readers, specifically those on the Peninsula…
If you’ve been tracking the local market, you’ll know that we’re in a strong seller’s market right now — completely unlike many other parts of the country.
If you’ve been thinking of buying, and have at least a 5-year horizon, my advice would be to start making your move now, but stock up on antacid beforehand. Prices are going up, multiple offers are back in style, and offers with any contingencies at all are considered suspect.
If competing with others isn’t your cup of tea, consider waiting till the summer or fall when other buyers are distracted. Be warned you’re unlikely to get a home for less than you will now, but at least it will be a less competitive environment.
If your time frame is two years or less, you’re usually safer continuing to rent. If your time frame is 3-5 years, then the buy vs. rent decision become more complicated and depends largely on your cash flow and risk tolerance.
The current strong market is likely to continue through at least the first half of summer, possibly longer. If it does cool down, which is not at all guaranteed, prices may level off, and perhaps even give back a modest portion of the gains they’ve achieved this year. Real estate prices, especially in this area, are notoriously sticky on the downside, so don’t hold your breath waiting for a significant drop in prices.
March 31, 2007 — 7:02 pm
Todd Carpenter says:
Were it for a primary residense and a qualified borrower, the answer is always yes.
As a second home, I think now is a very good time. Values may click down a bit more because of foreclosures, but somebody is going to have to pay for all of that defaulted debt. It’s not going to be the lender. The last time the U.S. had a true foreclosure epidemic, rates for A-Paper borrowers were well over 10%. Your buying power could actually weaken.
March 31, 2007 — 7:57 pm
Morgan Brown says:
Now is not a good time to buy. We’re going to see a lot of additional properties come on the market (here in So Cal) as the foreclosure activity starts to kick in to high gear.
What do I mean by “high gear”? Most foreclosure activity takes about 120 days to get started, so we are really seeing foreclosures that started to materialize at the end of ’06. 2007 has a huge amount of mortgage dollars set to recast ~$1.5 trillion. These recasting mortgages are going to put a lot of people out of homes.
I believe that the market will continue to soften until we’ve peaked off of the adjustment period and see some of the supply go out of the market. I would be looking at fall of this year as a good time to buy a home – from an auction, of course.
Sad news, but unfortunately very true.
March 31, 2007 — 9:59 pm
Paula Henry says:
Chiming in here from Indianapolis, as a former Arizonan. I’m with you Jay as far as a second home, if they are financing. If a cash buyer, I would wait a bit.
Interest rates will probably not hold for too much longer so finanacing now could weight the scales in favor of buying now vs. waiting for prices to drop.
For the general public, buying their primary residence, I believe now is a good time to buy, if they plan on holding for 3-5 years. It’s also a good market in Indy for some great investments; again, if the investor is willing to hold.
March 31, 2007 — 11:37 pm
Brian Brady says:
I think Morgan is correct about SoCal; the ARM’s recasting and rising foreclosures should keep prices in check for another 2 years. However…
…I don’t think that applies to coastal properties. I think there is a tremendous opportunity to pick up a second home within a five mile radius of the ocean.
Check out the “Blue Collar Beaches”: Imperial Beach, Oceanside, Long Beach, Port Hueneme, and Santa Maria. These burgs, traditionally shunned in favor of the more tony locales, have come down dramatically in price and are approaching a positive cashflow for the 20% down investor. They are being overhauled and retrofitted like a Navy carrier and will emerge as the “new and improved” California beach towns.
April 1, 2007 — 8:04 am
Tony Marriott says:
Buy Now! Any other questions?
April 1, 2007 — 8:25 am
Phil Hoover says:
Here’s my two cents’ worth for the Boise area.
We are in a moderate buyer’s market here.
Prices have come down, the number of closed units is down, yet our prices are actually increasing slightly year-over-year.
I think our price appreciation will remain in single-digit territory for the next year or two as we work through some foreclosures, but we are unlikely to be affected to the degree that other more overblown markets will be.
Many sellers are now helping by paying some buyer closing costs, offering buyer agent bonuses, etc.
I think this is a terrific opportunity for buyers with a longer view to get in and get a good deal.
Anyone buying Boise-area real estate today will probably be elated they did so in 3-5 years; and probably ecstatic in 10 years.
We have yet to be discovered by the national builders and remain a fairly well-kept secret.
It’s a beautiful place with an incredibly high quality of life!
April 1, 2007 — 8:33 am
Jeff Belonger says:
As many have stated… Buy, Buy, Buy. Especially if a primary.
In regards to 2nd homes…. Rates are the lowest that they have been in 3 years. Home values are down in many areas, especially the Jersey shoreline, at least from Ocean City down to Cape May/Wildwood. I am even looking into this now.
April 2, 2007 — 8:01 pm
Cari McGee says:
Tri-Cities, WA is not usually the first place people think of to buy a second home, but with 300 days of sunshine a year and excellent prices, I’d recommend it heartily. We are poised on the verge of a winery revolution and were just named one of the top eight wine regions in which to retire by Where to Retire magazine. The average home price for 2006 was in the mid 180’s, and we’ve been experiencing 3-6% steady increases every year. I say buy a 2nd home here today. This area is about to explode and if you can get in on the ground floor, why not?
April 2, 2007 — 9:09 pm