Hey! It's a buyer's market! Buy something!
Like any industry, real estate has its own confusing jargon. But in some local markets, those outside what I call "The Zone of Gracious Living" that surrounds Stanford University, the home-buying public seems unduly confused about the definition of this real estate term: "buyer's market".
In real estate, "buyer's market" means "a market that favors home buyers". From this, it's not much of a stretch to say that buyers should buy homes in a buyer's market.
But the paradox of a buyer's market is that most buyers don't and won't buy in a buyer's market. Instead, they stand around waiting for someone else to buy. "No, you go first." "No, after you, please."
Until it's a seller's market. Then the rising tide of buyers flowing irresistibly into real estate gets homebuying that vital Good Housekeeping Seal of Approval. All the dark clouds that sideline buyers in a buyer's market are suddenly whisked away, as they always are (see "market cycle"). An economic activity that looked way too risky a few months ago is now a sure bet you bet. And here in Silicon Valley, the pendulum swings just that quickly.
Admittedly, it's usually legitimate deal breakers that keep buyers from buying when they "should". Lay-offs and 18 percent interest rates have had a way of stopping most buyers dead in their tracks.
But this time it's different. The jobs aren't leaving Silicon Valley, they're coming. Buyers can get a thirty-year fixed-rate loan for under 7 percent, without points. Buying doesn't get any more compelling than this.
But uncertainty is as much a deal breaker as high interest rates or mass lay-offs. Real estate lost its steamroller momentum—its sure-thinged-ness—when sales and prices stopped skyrocketing. Mostly it's a matter of perception, at least here in God's Own Country, where in five years someone will want to buy your home even if prices aren't going through the roof. But perception is reality for most buyers (and most real estate pundits).
With sales (but not prices) dropping sharply from last year's record levels, I'm not surprised that all but one of my successful home buyers this year were move-up buyers. 2006 didn't look like an attractive homebuying opportunity to someone whose sole point of reference is dire headlines or the guy in the next cubicle who's hunkered down waiting for prices to tank since 1998. My successful buyers were successful because homeownership was good to almost all of them.
"Almost"? Yeah, there was one guy who took a beating back in 1994, when someone, maybe his home inspector, let him down big time. He bought a bad house and had to unload it in a down market. (You get it all here: the good, the bad, and the ugly.) He'd rented since then, but in 2006 circumstances and a cranky apartment manager conspired to make him a homeowner again. And when he saw how much happier his family is in their new home, that was enough. That was his pay-off.
He's a realist. He tells me he doesn't expect to make big money on his house in a year or two. He expects to come out ahead over the long term. Meanwhile he and his family enjoy a better lifestyle.
It's a back-to-basics attitude. Maybe that sounds corny, but it's the attitude of the successful home buyer. No obsessing over what prices will be next year; most of the obsessives tied themselves up in knots during the boom anyway and never did buy. No looking under rocks for the "undiscovered" neighborhood sure to be the Next Big Thing; most of the bargain-hunters tied themselves up in knots during the boom anyway and never did buy. No trying to outmaneuver a market pushed around by the irresistible force of economic, political and sociological trends at local, national and international levels; and, yes, most of the market-timers tied themselves up in knots during the boom anyway and never did buy.
No more smart guys trying to find non-existent angles to work. We're back to regular guys just buying houses and not having to fight uphill battles to do it.
That sounds like a good time to buy. That's your 2006 buyer's market.