Atlanta, GA · Member since 2019 · 20 posts · 11 votes
I heard on NPR yesterday that a buyer's market is on the horizon. Just curious if there's any validity to this statement? I know it's good for investors, if so, but to go off-topic for second...my wife and I are about to purchase our first home for us personally, so it scares me that we could be buying RIGHT before the market turns.
Remember, you only lose money when the market turns IF you sell. If it's your personal house and you intend to live their for a while then there is a high likely hood you will see a cycle in the market where prices go up and prices go down. But you have the luxury of deciding when to sell.
Just buy within your means (don't have 50% of your income going to the mortgage or something crazy) and you will be okay.
If it scares you to buy if the market turns. Easy fix " DONT BUY". The market turn should not affect your decision. Owner-occupied homes should be made without that fear. If you buy and don't overextend yourself you will be fine. Market prices go down, prices go sideways, go up. These are all behaviours of real estate.
Remember, you only lose money when the market turns IF you sell. If it's your personal house and you intend to live their for a while then there is a high likely hood you will see a cycle in the market where prices go up and prices go down. But you have the luxury of deciding when to sell.
Just buy within your means (don't have 50% of your income going to the mortgage or something crazy) and you will be okay.
There are buyer's markets and seller's market all the time. The label is applied to a specific market. They are not general/universal market descriptions.
So the answer to your question is, "yes", "no", and "it depends on what market you are talking about".
@Travis DeForge and @Joe Villeneuve, thanks, guys! Appreciate the input on this. Makes sense across the board. I think my wife and I are just a little jumpy right now with it being our first house purchase. Our mortgage will be roughly 28% of our net income, so I feel comfortable with that.
You can't predict what the market will do and it varies regionally. Ask yourself even if your house went down by $10K, but you lived there for 7 years vs renting...would you still be ahead? The answer is yes. You will have saved money by not paying rent (yes you will have some additional expenses) and you will have paid down your mortgage.
A payment of 28% of income doesn't sound too crazy. Your first primary shouldn't be your forever McMansion.
If not house hacking, get the worstish house on a nice block and don't be afraid if it needs some updating. Mine still has the original tiny built-in stove from 1961. It works and we don't give a rip. Spend money on investments,
Bonus if your first home will transition into a performing rental later. Stay grounded. HGTV is not your friend here.
@Steve Vaughan Right on, Steve! Yeah, I'm thinking of an idea for semi-"house hacking" by building a garage apartment in the back. The one thing this house is missing is a garage. And eventually, my mother in law wants to start staying with us for weeks at a time(retiring soon) to help us with our daughter, and our potential second child since we're talking about a second. We don't have family around and could use the help. And I did some research and saw that there is a great AirBnb market here, since we're right near the Atlanta airport. So I'm thinking we AirBnb the garage apartment to help make back some money each month.
Here in WA there are over 20 offers on almost every SFH I have seen within a day or so. Not sure what it would take to make this a buyers market. There are too many buyers in this area. I think rates would have to go up 2-3 % before people would be priced out. I know several people with cash waiting for the correction. Seems I have been hearing prices will come down for over two years and they keep climbing.
A payment of 28% of income doesn't sound too crazy. Your first primary shouldn't be your forever McMansion.
If not house hacking, get the worstish house on a nice block and don't be afraid if it needs some updating. Mine still has the original tiny built-in stove from 1961. It works and we don't give a rip. Spend money on investments,
Bonus if your first home will transition into a performing rental later. Stay grounded. HGTV is not your friend here.
Exactly, this is what I did when everyone said "the market will turn soon, wait", guess what? That was 2.5 years ago. Bought the worst house on the nicest street, fixed it up over the course of 9 months and have since bought a duplex. 3rd house under agreement now, and its the same scenario as the first house.
My father said "you really want to leave your beautiful kitchen you just finished for that outdated one?".
What seems like a downgrade to others, is an upgrade to me. It has the original 1960s stove top and cabinets. But to me, its a diamond in the rough. I could care less about an outdated kitchen... the $600 cash flow plus high appreciating asset is worth more to me 10 years from now.
@Hayes Mercure that’s why I recommend buying homes below market and adding value. Even for an owner occupied home, there are loan options that allow you to do that. Lenders and agents don’t push them as much because they don’t know about them, don’t understand them, or are just plain lazy! Even if you buy before a downturn, as long as you don’t let your emotions get involved while bidding, you should be in a safe spot.
Every outlet talks about a market shift “on the horizon”. You never know how far away that horizon is though. I wouldn’t let that affect your decision to buy. You could end up waiting for a while! In my market, a slight shift has started already.
Mine still has the original tiny built-in stove from 1961. It works and we don't give a rip. Spend money on investments,
Bonus if your first home will transition into a performing rental later. Stay grounded. HGTV is not your friend here.
Exactly, this is what I did when everyone said "the market will turn soon, wait", guess what? That was 2.5 years ago. Bought the worst house on the nicest street, fixed it up over the course of 9 months and have since bought a duplex. 3rd house under agreement now, and its the same scenario as the first house.
My father said "you really want to leave your beautiful kitchen you just finished for that outdated one?".
What seems like a downgrade to others, is an upgrade to me. It has the original 1960s stove top and cabinets. But to me, its a diamond in the rough. I could care less about an outdated kitchen... the $600 cash flow plus high appreciating asset is worth more to me 10 years from now.
Great example, Brian. You are on the right track completely.
Because so few of us recognize diamonds in the rough, days on market will be a good indicator if the home is outdated or not. Stay in the avg DOM x1.5 generally to find value adds on the MLS.
Not junkers that failed inspection 3 times, just outdated. Bonus if they haven't been partially renovated here or there over the years. Need Granny's house wiith hardwoods under the beautifully raked shag carpet that matches the green countertops!
Your personal home is not an investment. If you really want one, and can afford one at the price you're purchasing at, buy. If you can live without one and would rather wait until things get cheaper some day (that horizon might be a year or two out), then do that.
I personally belong to the latter group. I bought a home in 2012 for cheap. I don't need an upgrade but it would be nice. I'm not going to upgrade until there's a whole lot of discount in that upgrade, though.
Now if you're talking about investment property, I would say go out of state or don't invest.
It is mainly just recycling a news story from late last year when Robert Shiller claimed we are headed towards a new bubble. He is making a "prediction" it can't keep going up at this rate, but the problem is he is not being specific. It is kind of useless to make vague predictions. It is clearly just an attempt to be able to claim he was right later.
It is like me predicting the Yankees will win a world series in the coming years. It is a pretty safe statement. Even if they don't win, they are likely to be in a world series. I can later claim I predicted something that has good probability of happening anyways based on historical data.
Schiller is looking backwards. Atlanta is a great market and we are in a good economy. I really wouldn't stress over this. Buy a reasonable house you can afford.
Ppl have been pounding the drum for a downturn but the fact remains money is still cheap and as long as that remains asset prices will stay high...as monetary policy tightens which I think will be after the 2020 election, assets will go down as it becomes more expensive to borrow...now if you plan on staying in your house for 20 years this doesn’t really effect you if you plan on financing, if rates jump three points and the house depreciates 25% the monthly payment might very well be similar but it truly helps cash buyers who don’t need to borrow as banks will have need cash as well with higher reserves so won’t be lending as much either...
Mine still has the original tiny built-in stove from 1961. It works and we don't give a rip. Spend money on investments,
Bonus if your first home will transition into a performing rental later. Stay grounded. HGTV is not your friend here.
Exactly, this is what I did when everyone said "the market will turn soon, wait", guess what? That was 2.5 years ago. Bought the worst house on the nicest street, fixed it up over the course of 9 months and have since bought a duplex. 3rd house under agreement now, and its the same scenario as the first house.
My father said "you really want to leave your beautiful kitchen you just finished for that outdated one?".
What seems like a downgrade to others, is an upgrade to me. It has the original 1960s stove top and cabinets. But to me, its a diamond in the rough. I could care less about an outdated kitchen... the $600 cash flow plus high appreciating asset is worth more to me 10 years from now.
Great example, Brian. You are on the right track completely.
Because so few of us recognize diamonds in the rough, days on market will be a good indicator if the home is outdated or not. Stay in the avg DOM x1.5 generally to find value adds on the MLS.
Not junkers that failed inspection 3 times, just outdated. Bonus if they haven't been partially renovated here or there over the years. Need Granny's house wiith hardwoods under the beautifully raked shag carpet that matches the green countertops!
This is exactly what it was. It was listed last year @ 410k, dropped a couple times, then relisted recently for 379k. Got it for even cheaper. Best part about it, it is in incredible shape, it was very clean and well-kept. Just outdated. The three daughters of the original owner are the ones selling it. AND it has a finished basement with kitchen and full bath.
A little carpet and pink tile never hurt anybody. I only see opportunity, especially when the house was so well maintained.
Your personal home is not an investment. If you really want one, and can afford one at the price you're purchasing at, buy. If you can live without one and would rather wait until things get cheaper some day (that horizon might be a year or two out), then do that.
I personally belong to the latter group. I bought a home in 2012 for cheap. I don't need an upgrade but it would be nice. I'm not going to upgrade until there's a whole lot of discount in that upgrade, though.
Now if you're talking about investment property, I would say go out of state or don't invest.
I cant say I agree with you here. Your personal home can be an investment, or at least become one. Mine turned out to be a great investment. Ive lived there for two years.
When I bought my first home in 2003, I was thrilled to get a historically low 7 percent interest rate. Plug that into your home price....what you pay for the home is not the purchase price, it is the price over time. Very few homes go down in value over a long time frame. If you are looking at a 200k house at 4.25 percent, and then wait to get a sweet bargain at 180, but rates have moved up to 5.5, you cost yourself about 15 k over the life of a 30 year loan. Lock in the rate! Someday I am going to write a post on this. No one says they shouldn't buy that 40k new car, when you know for certain you will lose 20k in 2 or 3 years. In general, home purchases are very safe in comparison.
I highly recommend listening to the most recent BiggerPockets Money podcast about investing when it may be the top and their may be a recession on the horizon.
If you are conservative in your purchase and maintain a high savings rate you should be okay in your personal residence.
I try to think of buy and hold real estate like stocks, time in the market is more important than timing the market, and make sure the deal makes sense in all conditions.
Maybe I’m overly optimistic but how is the demand going to go away or decrease? Without massive population decrease. Population is steadily increasing. It does depend on the market but if you think market is growing I don’t see buyer market happening anytime soon given the amount of inventory and pace of building. Consider your long term goals as others have mentioned, if you need to exit house in a few years you could get caught, If ok to setup as rental or stay for a long time I think ok. Remember a primary residence is a liability as you have to pay for it every month. While it can be an investment if it appreciates that is not guaranteed, so you essentially have an automatic savings plan as you pay down the debt and hope the house doesn’t decrease in value. Also remember this is just my opinion! Best of luck.