A generally accepted observation of real estate professionals is that buyers buy when the market favors sellers. Why might that be? Partly, it is because it is human nature to follow the herd. But mostly I think it is the buyer’s caution and a lack of urgency that form the basis for their delay. The only certain way to know that the market has hit bottom is to see prices and sales volume rise, and that is the beginning of the seller’s market!
Here are a few thoughts that might help somebody who is thinking of purchasing their first home or moving up to a higher priced property. A sure sign of the market strengthening and shifting to a seller’s market is when the quality of the housing inventory improves. In a declining market the sellers are generally owners or banks that have an urgent need to sell (relocation, divorce, death, foreclosure, short-sale, etc.). A sign that the market is turning a corner and strengthening is when the inventory grows to include sellers who elect to sell for better opportunity, not urgent need. Consider the length of time that you expect to live in the new home, if it is more than five years; then the time horizon should minimize your concerns about paying the absolute lowest price for that home. If you wait too long, the price will be strengthened by the regained optimism of the market.
Several factors suggest that our market is at or near the bottom. We have seen the housing inventory begin to improve; that the quality of our inventory is growing to include sellers who elect to sell, not just those who have to sell. And while inventory is improving, the mobility of these new sellers is based on their ability to sell their home. So the buyer at the lower segment (first-time-buyers) still have strength to negotiate a favorable purchase price, as they are the lynch-pin in the seller’s ability to move to the next level of purchase and realize their bigger savings on their move-up property. That’s a dynamic of the market that is worth considering when thinking about when to enter the market.
