House purchase / Timing Question
 

I know that there are more than a few financial guys on here so hopefully you all can bring forth some sound advice. ;)

Here is my situation: Longtime GF and I are looking to purchase a home in the future. We live in the Northern Va area (close to DC) and the housing market is and has been very strong here even when other markets sag.

The 411: Combined income @$115/yr - very little debt less than $15K combined - very good credit scores. We are both former home owners but currently rent. We have a great relationship with the landlord and are month-to-month no obligation.

The question is should we plan to buy with-in the next 6-10 months or wait longer? The market here seems to have leveled with sellers offering concessions in pricing and $$ back at closing now. I have also seen several homes that have been on the market 60+ days. 6 months ago you would NEVER had seen that!

Ad to the mix that Greenspan is headed out the door soon. And before you know it another election is not far around the corner.

Obviously we would like to time the purchase when we would have the greatest leverage over the seller. I know that predicting the future is impossible but there must be some leading indicators now, plus past history / performance of the housing market.

Thanks! SmileWavy

Don't decide exactly when to buy a house. If you want to get the best deal, put the antennas up now, and when the right one pops up on the market, jump quick.

You need to have patience, and wait for the good one. But when it comes, it won't last long.

When I buy "fixer-uppers", my realtor has a rule- "If it's been on the market longer than one day, it's not a good enough deal."

The true bargains will get multiple offers the first day. They just don't come along that often.

The other way to get a deal is to play the waiting game. Sometimes you can find something that has been on the market for so long that the sellers are truely desparate. Time for a low-ball offer and see what happens. Usually, there is a reason its been on the market a long time. You better know why.

It boils down to how bad you want a house. Buying a home involves emotions, especially when women are involved. :) If you can hold your emotions in check, you might improve your position (ie more bang for your dollar).

I am convinced an adjustment in housing prices is upcoming. It's just a matter of how much and when. Timing has risks.

In my opinion, the chances of price declines are reasonable, and the chances of major price gains are doubtful. Would you be willing to stake a down payment now, when it could be eroded by an upcoming price decline?

Give this 3 months. By then, you should have enough data to determine the outlook for 2006.

Here are some articles and links:

Anecdotal Northern VA market comments

NVAR December 05 sales report

Higher inventory could be good for the buyer.

Washington, DC median housing prices

This tracks active listings and not sold prices. Nevertheless, you should pay attention to the trend as we approach spring.

Best of luck to you,
jurgen

Depends on how long you plan on keeping the house. Run some scenarios of rent vs buy. If you stay long enough and sell the house for even less than what you paid for, you could still be better off in the long run. Rent is a 100% loss--you have to compare the potential loss if you buy a house. This is just a financial analysis; there are obviously other factors that can play a roll.

The real question centers around whether you have the closing costs and down payment put together. Not sure of your situation or if you have looked into your mortgage options yet, but if you can't get close to 20% down expect to pay PMI. Not a big deal, my wife and I pay PMI but I would avoid it if I could :).

If rents are typical of bubbly areas, the 100% loss is actually a nice gain. I've seen rental houses listed for ridiculously low rates. We're talking $800k houses and asking rents of $2500/month. There is no way you can buy and make the numbers work.

Yep, mortgage interest payments to the bank is a 100% loss as well, and with the price of real estate in some areas those are pretty big interest payments!

In the Bay Area at the moment the average monthly mortgage payment is somewhere between 2-3 times what the same house would rent out for. Rents have been flat for 6 years.

What is that stat in NoVa?

Mortgage interest is not a 100% loss because you can deduct that interest off your income taxes. You won't get it all back, but it certainly makes a big difference come tax time.

To avoid PMI, a buddy of mine took out two loans. One for the house and one for the 20% downpayment. Sounded crazy to me but perhaps that's an option.

I think the market is due for a correction and prices will come down in the next year or so...but who knows.

Real estate asking prices ARE adjusting to "less than appraised" now. Searching the MLS I see homes where the owners are much more willing to deal.

I made the mistake of buying my first home at the peak in 1989. I was fearing if I didn't buy then (like now) home prices would soon be out of reach. Of course, just over a year later the market collasped. After two years in; the market value was level with very little increase after that. Plus I had a 30 yr fixed and the rate was 10+% believe it or not that was a good deal at the time.

Just don't want to repeat that situation again.

My gut feeling is that the real estate bubble has popped but that said, prices will not fall much if any. The rapid growth will slow down but back to where it was a few years ago and not stop totally.

Renting is paying someone else's morgage. When you own a house you are paying your morgage. Find a house you like, possibly a fixer upper and try and deal with the owner. The longer you stay in a rental house the more you are paying someone else IMHO.

JoeA

You just missed one of the best times, the month before and after Christmas. At least around here, the market pretty well dies between Thanksgiving and Christmas, then for a while after New Years as well. I think apprehension about taxes and property taxes probably play a role in that as well. If you're in a position to buy now, take your time, the right deal will come along. Don't rush into anything, there's always another good deal.

If prices don't fall, then there existed no bubble.

Asphalt, you're on the right track. You aren't forgetting history.

Well if prices stagnate for a number of years (i.e. don't keep pace w/ inflation) they are effectivley falling.

In the Bay Area renting is paying 1/3 of someone's mortgage :)