[quote=Rich Toscano][quote=earlyretirement]
I also just bought and know prices will head a bit lower but in investments it’s impossible to always catch the absolute highs and the absolute lows. [/quote]
That is the key concept here.
I can’t really agree with the idea that one should ignore the investment aspects of buying a home. For most people, the home is too big a portion of their net worth to NOT consider the investment implications. (Just think; if homes aren’t investments, why didn’t you just buy at the peak?)
So the problem I’m frequently seeing out there in reading the comments isn’t that people are paying attention to the investment aspects, which as far as I’m concerned is the responsible thing to do. The problem is that people are ignoring the crucial concept stated by earlyretirement, and they are getting angst-ridden over whether they catch the exact bottom.
Buying at the exact bottom or selling at the exact top shouldn’t even be the goal. If you achieved either of these two, it’s because you got lucky. The goal should be buying when something is undervalued (or fairly valued) and selling when it’s overvalued. If you buy something undervalued and it continues to get more undervalued for a while, you still did the right thing. You will almost certainly be rewarded for it eventually. In our uncertain world, all we can do is make a habit of buying at reasonable prices and selling when things get overpriced, and it will work out for us in aggregate and over time.
Now, houses aren’t dirt cheap or anything (they are about fairly valued in aggregate), and of course your mileage varies based on where you are buying and what deal you find. But in general, most people who are buying now have missed out on the crash portion of the decline. That’s huge. There is so much less risk now than there was. It’s not risk-free (nothing is) but the risk is so much lower for having waited this long, I just don’t think the angsting about whether you hit the exact bottom makes any sense. You avoided the biggest ever crash in housing… that is awesome and puts you in rare company. It should be good enough, because nobody knows when the exact bottom will be, so as I said, all you can do is avoid the high risk overvalued situations, which you have.
Also, as many have pointed out, the investment merits of getting a mortgage are huge. Housing may not be particularly cheap purchase price wise, but borrowing money is DIRT CHEAP. That is a situation where if we are not at the very bottom, we have got to be damned close it it. So as I’ve pointed out before, as long as you are a long-term holder and buy somewhere reasonable, you the ultra-cheap mortgage brings down the effective price of your already reasonable home. So now there is even less reason to worry about whether you hit the exact bottom.
Well I got off on a bit of a tangent there… my main point was to agree with earlyretirement that the goal shouldn’t be to hit the exact top or bottom; it should be to buy at a good price for buying and sell at a good price for selling, and not to worry so much about what happens in between.[/quote]
Hey Rich, Great post. I didn’t mean to suggest that people shouldn’t look at their home as an investment. I only meant that people shouldn’t focus too much and think that is the ONLY purpose of a home purchase. I’m not speaking about investment properties. I’m speaking about buying a home to live in.
Yeah, you caught on exactly what I was getting at. Yeah, real estate will fall some more. I’m not saying that it’s the greatest time to buy. I’m just saying what some have mentioned..(including you). It’s a decent time to buy if you’re buying for the LONG term and buying to live in. Especially if you found the perfect home that will work well for your family.
I’m still comfortable buying today (July 2011) in San Diego and that in 12 to 15 years when I sell (when my kids graduate from high school and I don’t need a 5 bedroom house) … I’ll feel comfortable with the price that I will sell for. Yeah, I guess the house in a way is an “investment” but that isn’t my primary purpose for buying. And I’m certainly not going to sweat or worry about what prices MIGHT be when I sell. I’m buying only what I can afford.
Sure, the fact that mortgages are dirt cheap help buying now but even discounting that fact totally… I know several friends/clients/investors that are buying properties both distressed and non-distressed with cash. They are already well diversified in the stock market and other investments and cash is paying almost nothing.
So we went in with cash offers and negotiated great prices. Contrary to some belief that all sellers are ignorant…there are some intelligent sellers out there that realize that cash offers are valuable and discounting significantly.
I think your point Rich about feeling good about avoiding the top of the bubble is a good one. Whether you miss the absolute bottom I think shouldn’t be your biggest worry.
Buy what you can afford and buy for the long term a house that you will be happy living in for the longer term. I think if you’re doing that then you will be happy.
I’m not saying that it won’t hurt to wait until later in the year or 2012. I don’t think you can hurt waiting… but if you find your dream house for your family then I think you shouldn’t worry about catching the absolute bottom.
Anyone that claims to always time it right so they catch the absolute tops and absolute bottoms is lying. Sure it can happen from time to time but it’s impossible to always catch them.
