Why would people buy now in this market?

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Kali_IHB

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<p>With current market conditions, people are still buying homes.</p>

<p>I really do not understand why. Do they have too much money to burn or are they misinformed?</p>
 
It is also possible they don't really care about the price. I have several friends making 300k+ per couple, and they just did not want to wait. This is especially true among my foreign friends. It has nothing to do with being rich or anything like that, they want a piece of the American dream, and they don't want to wait. Buying a house here gives them a sense of belonging. Besides, comparing to places like Shanghai/Beijing, Irvine/Newport price is actually quite low relative to income. I don't make nearly as much, so I will wait with the rest of you guys :)
 
I would venture that most people think that if they want information on real estate, they ask a realtor. Try asking a realtor if it is a bad time to buy a home <i>"with current market conditions"</i>. Even the MSM constantly goes to realtors for expert comentary on real estate market conditions.<p>


Or maybe the home they have wanted for awhile just declined by 10% in price and it is now withing their budget range. Or maybe they just recently inherited the down payment and can't hold onto that hot moola.
 
<p>Some Irvine Builders are selling 23% below comparable peaks. Some might ague it's a good deal and bought. Some resales have the same price pattern.</p>

<p>Tourbillon, I still think you should consider contracting jobs to boost your post-tax income and increase your buying power.</p>
 
NIR


I am too lazy :) I make enough to have a fairly comfortable living, and buying a house is not high on my list of things to do. At this point, I am not sure how long I will stay in the US. I have multiple citizenships so I am not really tied down to one place, and OC/LA is far from being the ideal place for me.
 
<p><em>"I still think you should consider contracting jobs to boost your post-tax income and increase your buying power".</em></p>

<p>Ah, there's our girl. </p>
 
I agree with awgee. Many people rely on a realtor when they start looking at homes.......and a realtor always says it is a good time to buy or sell........or make a transaction. However, as the headlines on major websites, and newspapers present the facts about the direction of the market, more and more people move to the sidelines.





This is why many in the real estate industry do not like it when the press puts out negative stories about the real estate markets, in effect the negative stories take away a real estate agents power, or at least their compelling arguement for buying. Blogs such as this, which weren't available 5 years ago are even more troublesome to the real estate industry, they are losing even more control.





It used to be that a nimwit like pat veiling could put out some goofy report every month or two and that was all anyone got of the market.
 
<p>Could they be avoiding a capital gains tax from a previous home sale?</p>

<p>Nano you hit it spot on about the RE industry. I think Zillow/Redfin etc will also help stall home buying. Information is power. Now with the click of the mouse you can see all the homes that fit your specific criteria. No more relying on a person that really only has their best interest in mind in the purchase of sale of a home. </p>

<p>Imagine walking into a seller with your laptop, a wireless card and redfin. Mr/Mrs. seller I don't know what your agent is telling you but if I put in your homes specifications I could buy 30 homes just like yours for less money. Here is my offer.</p>
 
trrenter - Somewhere recently I just read about a site that puts buyers and sellers together with no agent involved at all. Talk about a win-win for both parties.
 
IMO, people buy because they want a home. Most people don't know a great deal about financing and financial markets. They do know the mortgage broker tells them they can have a loan, a realtor tells them it is a good idea to buy, and the buyer believes they can make the payment, so they buy. We can complicate this as much as we want, but the truth is probably that simple.
 
We bought last month. We found our dream home and it was very affordable to us. We put almost 40% down, and have a reasonable fixed mortgage. We will stay in this home forever. I grew up in this neighborhood, I rented in this neighborhood and now I finally get a piece of it. I don't care if our home drops in value by 90% since I am here to stay.





Perhaps most people with our income would want a bigger flashier home, but we prefer a smaller home in this specific neighborhood. Homes almost never come up for sale in this area so we consider ourselves very lucky. My neighbors on all sides are original owners and these homes were built in 1976.
 
<p>The internet (for me google) has done a great job in minimizing the inefficiencies of the economy. In the olden days, real estate agents held the monopoly of information, and us common folks had to rely upon them for all of our information. The same goes for mechanics who work on my car, the salesman at Fry's for my flat panel tv, or any other industry for that matter.</p>

<p>Since this is a real estate blog, there are things on IHB that no realtor (NAR) will ever tell me (or admit that they even understand how the market work themselves) and no lender would have ever disclosed to me directly because of conflict of interest. Information is everything and knowing more is not just advantageous, but it is how today's economy works. For me, I thank all those who contribute to this site for the great good of all. 6 months ago, I thought of buying a house, then googled myself to death until one day I found this blog, along with a host of others. Thank you all. </p>
 
I know this has been brought this up before, but don't underestimate the power of peer/family pressure...the whole "now you're at the stage of your life where you should be buying a house because you're supposed to" thing. I'm fighting that one off as we speak
 
<p>caliguy2699,</p>

<p>Me too. The wife wants to start a family in a couple of years and, therefore, wants to buy in late 2009. She's starting to worry because I've told her prices could fall (adjusted for inflation) until 2012. I've been trying to explain that we could rent a nicer house than we could buy, but she simply doesn't like the idea of raising a family in a rental. I think she's crazy, but I of course don't tell her that.</p>

<p>Any strategies you care to share for persuading the wife to wait until the market fully adjusts? My current approach is telling her that we will be able to retire much earlier if we wait to buy something truly affordable. I just hate the idea of being pressured into buying in late 2009 and then losing some (or all) of our downpayment. I would probably resent her for that -- and that's not good for anybody.</p>
 
<p>skeptic;</p>

<p>I recommend sitting down with her and showing her the numbers and how advantageous it would be for you guys to wait an extra year or two and stash money away towards retirement, savings, or even vacations. My fiancee and I sat down with a couple of financial planners and went over our strategy, and its comforting for us to have a financial professional to confirm what you are doing is correct or help you get to where you want to be.</p>

<p>my 2 cents...</p>
 
<p>skeptic,</p>

<p>Very good points. It is hard to escape the stigma of renting being seen as fundamentally "worse" than buying, as if you're confined to renting either because a) you're too young/immature and not financially ready to buy, or b) you're stuck being a renter because you don't want to make a commitment to live in the area long term, or simply don't have the financial discipline to join the homeowner ranks. But, considering the way the RE market is going, this is not necessarily true anymore.</p>

<p>Since some traditional barriers of home ownership (sizeable downpayment, stable income, good credit history) were minimized or wiped out completely during the boom, it's hard to argue that home ownership can still be so closely correlated with responsible financial behavior, since many who really should not have been able to borrow money to finance a home were given a green light. Sure, many homeowners are very responsible, but an increasing number aren't - evidenced by the record numbers of foreclosures.</p>

<p>In fact, I'd argue that financial reponsibility can just as easily be found among other groups, like those who sold their property as prices began to shoot up, or those who did a thorough analysis of their finances and then decided that renting made better sense to them in the short term instead of believing the hype and overpaying for a so-so property that doesn't fit their lifestyle/needs. </p>

<p>I'm fine with renting right now in a good condo complex in a great area, particularly when we're saving a boatload each month on our rent compared to what the mortgage would be. That's one thing I certainly remind my wife of often. The bonus is that we're saving up a downpayment for a property that is going to be a good match to our needs, that we can buy when prices are better in line with what we're comfortable spending. </p>
 
I have been thinking about what IR wrote. And want to take it one step further. Maybe when a family wants to buy a home, many times they talk to those who will give them data which fits what they want, and maybe they read the data which fits their view and desires. Maybe they buy because they want to believe the bottom is in, or decreasing prices won't affect them, or it won't matter to them for whatever reason.<p>




skeptic - Something that helps my wife is that we go to look at the homes of the type that we are setting as our goal. And when I show her how we will achieve that goal, it becomes real for her. She now knows what she wants and she knows how we will get it. And she has come to trust that it is more likely to happen than not, because the progression of events has pretty much followed what I told her would happen.
 
We bought a new home, and we're still happy with our decision, here's why:





1. We're able to put 55% down, so our PITI is near the rental rate for a home this size.





2. We're staying long term in Irvine.





3. The builder offered what we considered a fair price for the home





4. We're buying a home, not investing in real estate. In other words, none of our plans/projections include gains from our home value, and we don't really care about short-term market corrections (by short term, I mean less than 10 years)





5. We love the area and village (Woodbury)





6. We are fairly risk-averse people with no debt (i.e. we prefer a stable, monthly PITI from a 30 year mortgage versus rent increases)





-OCR
 
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