When is the best time to buy? Pt 1 from my newsletter

When is the best time to buy?
The answers really depend on why you are buying first. If you are investing it is fairly simple and we can address that later. One thing to remember is that most investors – stocks, real estate, etc – are always late to the party. The pros make their money on the herd coming in to a market.

If you are buying for the purpose of living in a new home, be it a relocation or upsize or downsize, it becomes more complicated. There are hundreds and thousands of studies out there that speak to the fallacy of ‘timing’ a market. There are a lot of people in the financial news for timing the stock market and it boils down to the best timing you can do is based on insider information. So, as a buyer, how do you get ‘insider information’ on the housing market? Research. If you look at historic trends and look at the last time the market ‘corrected’ you can then look for trends at that time and most importantly perhaps at the trends following that time. What type of data points do I look at? Mortgage rates and applications, rental vacancy rates, inflation and fed funds rate predictions, listing and sales trends to start with. Just like any statistical analysis you can go nuts but I just try and match these up with my situation or my buyers situation and act. We are in an unusual and desirable situation here in St Pete due to our location and climate in that we do have traits that attract buyers to the region. If you lived in Nebraska or Kansas, for example, I would pay very close attention to those statistics in a down market. (Please don’t take offense if you live in those states, but c’mon) One of my favorite golf courses is in Kansas, but I am not going there at least 6 months out of the year! I will try and expand on this topic on my blog if I can continue to make that a part of my daily and weekly routine, but I will tell you what I tell my clients that are currently looking to buy for residence purposes that if you look historically at the worst market corrections as being in the 19% range (and I think that was aggressively looking at the numbers), then look at what the home is priced at today, what it was priced at originally, and make an offer 20% less as the worst case scenario. In our market, you probably won’t get the home in most cases, but it can be a start. I am not crazy about making offers at 80% of list price, but I do use that as a worst case scenario for research purposes. You then have to ask yourself is this a worst case scenario? Are there less appealing places to live? You bet. So, if you can buy a home at 85-95% of the proper list price, you can look at it as a discounted price for paradise.

Please remember you are buying a home. This isn’t something you should buy expecting to sell it in 2 years and pocket a 40% gain even though you could have a year or two ago. Heck, my parents sold their home in WV that they lived in for over 20 years and sold it for something like 20-25% more than they paid for it. We are trained here in florida to now expect stock market type returns that are unrealistic, but I do feel like we have a great product that will appreciate more than other markets.

You know, I look at New Orleans as an example. I don’t have the statistics in front of me but I look at New Orleans as a worst case example for here. What if a major hurricane wipes out St Pete? By some accounts that I have read, the New Orleans residential market has improved in value since the storm. I don’t know enough about the market to comment on why, but it is definitely something to look into for perspective.