Doom & Gloom. I see everybody is trying to manage their expectations for when the “right” time to buy will be. But frankly, I think you’re all overly pessimistic on it.
I think buying opportunities that are competitive against renting will materialize in as little as 18-24 months. I expect the January/February months to be ball-busters for sellers. Owning is about living expense, not only gross capital purchase.
The deals are made at the margins. The “right” buying time for just the people in this thread will be spread over 36 months or more. The short sales and REO properties are already showing up in MLS and done deals which are quickly blowing holes in the comps.
Many will be trapped in their homes because they can afford the payment but can’t forward the capital loss. Still, in SD, OC & LA, even more have been comfortably in their homes for years and while refinancing has tapped cash out for many, in 2005, only 1 in 9 refinances withdrew money. I’d wager many are serial refi-ers which account for the bulk of earlier cash-outs. Evidence of this are articles like the LA-Times piece on guy in the IE with a exotic and no job finally getting forced to move.
The relative lack of refi-ers compared to owners means there will be plenty of willing sellers. Those sellers will be able to afford selling, still make a profit and move up when a better home for them becomes available at an acceptable price.
I’m seeing more and more REO’s like in this thread. Not only is it taking a 15-20+% hit on the peak buy, but that’s at MLS list price which is looking like a pipe dream. As these types of property transactions accelerate and grow, REOs will go lower and lower. That will drive comps lower and lower.
Will pricing go lower after that? Maybe, probably, but time is money. Money is money. What you need to know is few key things:
What are purchase prices where you want to live (or accept living)?
What are comparable rents for where you want to live (or accept living)?
What expense for housing are you comfortable with having?
What is your tolerance for keeping a property as a rental?
I say (or accept living) because I find it rather odd that people will tolerate renting in hell but only buying in prime RE and vice versa. Similarly, this may be that you want to live down on Coronado but will accept North Coast.
Where they intersect is your buying point. Sure, maybe you could wait 5 years and get it 10% less nominal and 15% less real over two years from now, but maybe you’ll also be three years into having it paid off with essentially the same payment and already moving out into a better place with renters taking over this one covering the payment for you. Maybe not.
If you wait for absolute bottom only, you’ll wait a long time.
