Buyers, be sure you know which bus you're waiting for.
These days the real estate market is tough on homebuyers. It gives them big questions to answer. Will prices in some neighborhoods keep going up? Will prices in other neighborhoods keep going down? Everyone has an opinion: the bloggers, the mainstream media, and even the guy in the next cubicle who's been waiting for real estate to crash since 1998.
Especially him.
When real estate is this uncertain, homebuyers often decide to "wait for prices to settle down". If that's your decision, be sure you know what you're waiting for. Know the number of the bus you're waiting to catch. Because if you don't, you'll miss it.
Bus riders sitting at a bus stop know which bus they're waiting for. That's what makes them real bus riders. That's what separates them from the people who sit at bus stops just so they can watch the world go by.
Which bus are you waiting for? The Prices Down 5% bus? Or are you holding out for the Prices Down 10% bus? Or maybe the Prices Down 20% bus? The Prices Down 50% bus?
It's not enough to know which bus you're waiting for. Also be sure you know why you're waiting for that bus. If you're waiting for the Prices Down 20% bus, is it because the neighborhood you like sells for 20% more than you can afford? Or is it because your gut tells you that prices are 20% higher than they should be? How reliable is your gut? Have you analyzed its track record lately?
Then you'll need to know if the Prices Down 20% bus has ever stopped in your target neighborhood. If it did, what brought it there? Was it recession and layoffs? A terrorist attack? The drumbeat of war? All the above? How likely do you think it is that these events will happen again? Are you basing your other major life decisions, like stock market investments and career choices, on the same scenario?
Do you know what the economy will look like if the Prices Down 20% bus comes? (Does anyone?) Will it be the kind of economy that makes you feel good about buying? Did you buy the last time the Prices Down 20% bus came, when Silicon Valley was laying off tens of thousands, or during the jittery days right after 9/11, or when the invasion of Iraq looked like we might be heading toward Armageddon?
If you're waiting for the bus, you'll also need to know what you won't know. You won't know the Prices Down 20% bus has come until it's gone. Timing the real estate market is impossible except by accident, because the Prices Down 20% bus still has the old Prices Down 10% sign on the front as it pulls up to the stop. The new Prices Down 20% sign will be at the rear of the bus, visible only as you watch it pull away.
That's the nature of a market in which transaction prices are only known thirty days or so after they happen. And the volatility of the local real estate market over the past eight years has shown us that things can change a lot in thirty days.
How will you know, absolutely know, that the next bus is the right bus, the bus you've been waiting for? Should you get on that bus, or should you wait for the one after that, as so many do, because sitting postpones tough decisions? And because the next bus might be the Prices Down 30% bus.
Or will it be the Prices Up 10% bus, the bus everyone who knows Silicon Valley real estate history knows is out there?