If you wait on the sidelines, you never get in the game

Well friends, we seem to have reached an impasse. It is amazing how one event can trigger a series of events that eventually change to course of a nation. This is a real estate blog, so I will focus on the chain of events that turned the market 180 degrees over the course of just about one year.

It was August 29th, 2005 and most Americans were glued to t.v. sets watching images of a large storm covering what seemed to be the entire gulf of Mexico. The storm was headed for the area between Louisiana and Mississippi. At one point, it was a class 5 hurricane. As it approached land it began to diminish in strength. Officials relaxed and felt that maybe it would not be so bad. Then the storm surge hit and destroyed an area that ran from Florida to Louisiana including areas in Mississippi and Alabama.

We watched in horror as levee’s were breached and the crescent city of New Orleans began to disappear under water. Several days of non-ending coverage of the plight of those left behind began to erode our faith in elected officials.

Shortly, another storm was in the gulf and officials began to react to avoid the problems that had just encountered. Oil refineries were shut down. Cities and highways were in chaos. The first storm problems led to the second storm problems.

The problems that began last year, continue to impact the real estate market today.

What happened? The cost of living began to creep up in areas that could not be controlled by government actions. Energy costs shot up. The cost of gas began to move towards and past $3.00 a gallon. Providers of electricity and natural gas and oil all raised their prices. As soon as deregulation hit utilities (in the hope of increasing competition and therefore lowering prices) there was little competition and rates across the country were raised anywhere from 30% to 70%.

The feds began an unprecedented series of rate increases in the prime rate. The cost of money moved beyond the reach of many first time home buyers. This was coupled with the fact that many new home owners had financed all or part of their purchase with loans that were adjustable and tied to the prime rate. Some home owners that viewed the perceived equity increase in their home as a financial boon, took out equity lines that were tied to the prime rate. The rates began to rise and the payments began to rise as well.

Little rebuilding has been accomplished in the Gulf States. We have yet to feel the impact on the demand for building supplies. That will come. We have yet to see the employment picture change dramatically in the Gulf area. That will change.

All of this has happened. Now many of you that thought it was time to buy, have returned to the sidelines to wait out the economy.

The result of that decision is that you are missing the best time to buy a home!

All of these factors have stifled sales. Homes are on the market longer and sellers are now realizing that they will have to make concessions in price and other areas in order to sell their home. Today, you can buy more home for the money than was possible over the last few years. Prices for sold properties have leveled off. When listed, they may seem like they cost more than last year but that is just the hopes of those putting a home on the market. Bidding wars, that occurred over the last few years are all but non-existent today. A good Realtor can guide you through the process and negotiate a better deal for you.

Understand, the cost of living is not going to come down. Major oil companies do not expect gasoline prices to ever return to the levels of last fall. Utility companies are not going to reduce their prices significantly. Even start up competitors will have use the cost of fossil fuels in their price structure. Fuel costs impact every other item we buy.

The only factor that changes over time is the interest rate. Waiting on the rate is never a good game to play. If it goes up, prices go down and that is our current situation. If the rates start to fall, the demand for homes will increase and the prices will begin to rise again. This cycle has been repeated over and over throughout the history of home buying.

Now is the time to purchase. You can buy more home for the money and you will own the property when rates decline in the future. At some point, you will take advantage of a lower rate through refinancing and you will then own the home at a lower cost. Should rates increase a bit, you will be in your home and the rate increase should not impact you.

I encourage anyone that has gone to the sidelines to rethink there position. If you wait on the sidelines, you never get in the game.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s