By June Fletcher
Question: Is now a good time to buy a home, or should I wait for prices to fall further?
Everybody: With the housing market on life support, just about everyone I talk to these days is asking some version of this question. So rather than answering for one person in a specific market, I'll tackle the issue generically.
Nineteen months past its peak, residential real estate continues to weaken, with prices and sales down and inventories rising across the U.S. For sellers, this is ghastly news, of course, but buyers have mixed feelings. On the one hand, after years of bidding wars, instant offers without home inspections and even penning poems to convince sellers to hand over the keys, it's delightful to finally have choices and negotiating room. On the other hand, it's a bit frightening to make a commitment now, when there's a chance that prices could drop even lower.
Caught between opportunity and risk, what's a buyer to do? Here are some ideas to keep in mind in our current "buyer's market":
Buyers, not sellers, set prices. This may seem counterintuitive, but all a seller can do is suggest an asking price. The real price is whatever a buyer pays for it.
In 2004 and 2005, home prices rose because buyers flooded the market -- now prices are falling because buyers are sitting on the sidelines. Meanwhile, the number of homes being built hasn't changed drastically; rather, supply is growing because existing-home sellers can't figure out what buyers are now willing to pay, so their homes are sitting on the market.
Comps may not matter now. When markets are in upheaval, either up or down, recent sales of comparable houses are of less value than they are in more stable times. So take a look at public records, which are now often listed on Web sites, as well as Internet tools like Zillow and Trulia. But take them all with a grain of salt. They may be guiding sellers as they set their asking prices, but they don't necessarily indicate what a seller will accept, since the market is in flux.
Agents are talking. When times are good, listing agents typically reveal little about their sellers' motivations or pricing strategies ... which is as it should be. Listing agents have a duty to get the best possible deal for the seller.
But agents don't get paid unless deals are made, and many are hurting now. So many have looser lips than usual -- something that sellers should keep in mind when they tell their agents about why they're moving and what price they'd ultimately expect. Buyers, however, aren't breaking any rules by asking, and the information they receive could help them decide what and when to bid.
For instance, I recently visited two open houses in Naples, Fla. -- a place with extremely high levels of unsold inventory -- where the respective agents both told me their sellers planned to drop prices drastically the following week. That's not what agents are "supposed" to do, but it's happening, especially in the softest markets.
Timing the market isn't possible. Although many economists predict that nationally, housing still has a way to go to reach bottom, you don't have to wait for that to happen to get a good deal. In fact, it's better to buy when housing is trending down than when it reaches the floor, since at that exact moment, the balance of power begins to shift toward the seller again. So if you see a house you like and can afford, make a bid now. And don't worry about insulting sellers with a "lowball" offer. They may be desperate to move because of a new job, marriage, divorce, overstretched bank account or other motive. Yours may be the only bid they've received in months and they may be very glad to have it.
-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Mondays on RealEstateJournal.com. Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.
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-- March 12, 2007