Buying a Home in Uncertain Times: What If Prices Go Lower?
It seems that all of my conversations with prospective home buyers include concerns on their part that prices may go down again. With all of the talk of double dip recession possibilities and the huge number of about-to-be-foreclosed on properties, that it might be better to just wait it out.
Or it might not be.
Let’s say that worst case, you buy now and prices decline. This has happened more than a few times during my three decades of selling real estate. And while what happens in the past doesn’t necessarily tell us what will happen in the future, the prices have always come back at some point. Prices tend to go up and down in cycles, and the up cycles usually involve higher highs.
If you find yourself having to sell during a down part of the cycle – let’s say a really down part – you could find yourself losing money on your sale. But if you are buying another house, you will probably wind up paying less for your new place than if you had purchased it in the market where you bought your first home.
In other words, it’s a wash.
And if you are buying in the Washington area, you have another option. The market for rentals has pretty much always been a very strong one. You can hang onto the old home and rent it out until the market comes back. Still, you need to keep in mind that if you are renting in the District of Columgia, you have to be careful to comply with the landlord tenant laws, meaning you must get a business license and register the house or apartment. In the area, the demand for good rentals has remained high, as have rents.
If you are buying a home you plan to own and live in for the long term, the prices are likely to increase again before it’s time for you to sell. But there are no guarantees.
In the 1990′s, the Washington area was totally in the dump. We had a mayor who was headed for the slammer, a city that was broke, and not just financially, awful public schools, huge pot holes in the streets (we called them cocaine holes) and some idiot was running around the Mount Pleasant area shooting people at random. There were a few riots, and lots of people were selling, trying to get out of Dodge. And the few brave souls I represented who bought their homes here during this period think I am totally brilliant – the ones who sold between 2002 and 2007 made a killing, and all of these homes are worth much more than their purchase price at that time.. These buyers jumped off the fence when nobody else had the guts to do it.
If you have reservations about buying now, you are not alone. And that is exactly why you can buy low now so you can sell high in the future. If you wait until the return of the 2006 market, that might not be possible.