Maybe I'll just wait...

I get to do quite a few Comparative Market Analyses (CMAs) for potential sellers or just folks who are curious about the impact of the current downturn on the value of their homes. Most are not overly happy with what I have to tell them and many let me know that they may just wait a year or two, to wait out this downturn, so to speak. Here's what I normally tell them in reply:

Lots of people are in the position where their homes are worth less than they owe or less than they feel that they can afford to take for them. We are still in a market environment where homes are losing value at a pace of 1 -1.5% per month. The best pundits are predicting (hoping might be a better term to use) that we will see an end to the slide by the end of 2009 or the first part of 2010.

No matter when the housing market turns back to the positive, no one is predicting a rapid recovery of the lost value. Instead we are looking at a decade or more to get back to where values were just 2-3 years ago, if indeed some properties ever recover to that level. The high point that values have fallen from was an artificial, housing-bubble-induced level that may prove to be more than normal appreciation will allow again. I certainly understand the immediate reaction to say, "Well, we'll just wait it out"; however, many of us will be long gone before the homes values that we had (or thought we had) will return.

Here's my advice.

If you are at a life-stage where you had planned to upgrade to a bigger and better house - go for it. The market has never been better for that and you will make up on the buy side what you loose on the sell side.

If you just felt antsy for a move, with no particular motivation (like a job change), then wait a while and see where the market stabilizes. Just don't count on it magically bouncing back to the 2004-5 levels anytime soon.

If you are ready to retire and downsize, go ahead and take a small hit on the sell and buy equation, if the change will make a significant difference in your life or lifestyle. If you've planned and saved and waited all your life to retire and move to wherever, don't put those plans on hold; because, wherever is probably in a down market too and has great bargains on that end. Do it before you get too old to enjoy it. Downsizing is the most painful, because you will take a bigger hit on what you sell than the benefit that you get on what you buy; however, you will likely save enough on the smaller taxes and energy bills and other factors with the smaller place to make up most of that loss fairly quickly

You'll notice that there really isn't an answer that equates to "OK, if I do that, then I won't feel any pain from this downturn." That isn't going to be true for anyone who bought in the last 5-6 years or who need to sell in the next 5-6 years. For homeowners who bought 10-15-20 years ago or longer; you are still going to make more than you paid for the house, sometimes lots more; you just need to let go off the false "value" that you thought was in the house a couple of years ago. You missed that boat, get over it and move on. I didn't buy Microsoft stock when it was first introduced either, but I've stopped beating myself up over that failure.

If you bought in the last 2-3 years, basically you're locked in to a loss that may have wiped out your entire equity and more. If you put 20% down, it's likely all gone and more. If you bought using one of those 80-20 programs with second mortgage (many of them ARMs) then you likely owe much more than the house is now worth. In both cases you'd have to wait maybe 8-10 years just to get back to even and 12-14 years to be in a position to sell at break-even. If you bought a foreclosed house in the last 1-2 years and got a really good price on it, you might be OK, depending upon how much you had to dump into it. That $200,000 house that you picked up for $100,000 an then dumped $40-50,000 into may only be worth $130-140,000 on today's market.

So, is it all doom and gloom? No, but it does require a level of discipline, patience and perseverance that many sellers and buyers just don't have. You cannot rush into either a sell or buy decision in this market. Thorough analysis is required both to set a reasonable sell price or to make a reasoned buying decision. It is also not a time to be doing either without the counsel of a real estate professional. Too many would-be sellers are making the mistake of thinking that they will save by not paying a commission to a listing agent by trying to sell their homes themselves. Their logic is that they can use that difference as their "wiggle-room" on the price. And some buyers have this mistaken belief that they should deal directly with the listing agent or FSBO seller to try to get a better deal. Both are wrong and it can be a costly mistake for both. I'd be happy to explain why, if you call me.

Let me just say this. Homes are selling. Real Estate One sold over 14,000 in this area last year. And there are still good deals out there for buyers. If you get a good Realtor to guide you, either side is do-able, even in this market. On both sides, I always counsel not to get greedy. The greedy seller sets his price too high and doesn't sell and the greedy buyer low balls every deal and never wins the house that he wants. Real estate sales have to be win-win propositions in order to work. Let me help you get that win.