What Happens Next...

Well the world of real estate is in chaos again. Rates are up, homes are taking longer to sell and selling for less, buyers are upset about the rates and the media is telling everyone the sky is falling. What are the weary real estate professionals to do?

I asked a friend his thoughts and wanted to share a couple of them with you.

"Are you worried about the market?"

"Worried no but I certainly am concerned about the short term market. The rates are a challenge to explain to first time home buyers as most of them were children the last time rates were this high. They think 3% is normal and that will take time for them to accept. Inflation and other economic worries are certainly out there, but you must remember a key factor."

"What is that?"

"Housing is one of 3 essential things people need, along with food and clothing. As long as the population keeps growing new homes will be needed, builders will build and buyers will buy. The question will be do they buy smaller homes, greener homes, condos... will we see a change in what buyers want and what impact will a change have is what I am focused on."

"Do you expect prices to fall?"

"I have always said a home is worth what people will pay but I think the last couple years proved that wrong. Everyday I heard buyers say they paid more than the house was worth, but they were desperate to get a house. So I would answer the question this way... I think homes will sell for less as buyers become unwilling to over pay, but I don't think the value of the home actually has gone down. The other factor is that if you are selling and buying... yes, you will get less for your current home but you will pay less for the new one than you would have just months ago."

"So in your opinion is it a good time to buy a home or should people wait to see if prices go down?"

"That is such a hard question to answer because we don't know what will happen next year. Do rates go up further or do they drop, what does the election bring and what happens in the economy? I know this... when you buy you lock in your rate and payment but when you rent your payment will go up (possibly every year). So pay 7.5% for your home and build equity or pay 100% to your landlord. Which is the better choice? Even in 2007-09 when home values dropped they bounced back rapidly and have appreciated at a rapid rate so I feel good about the long term."

Interesting answers... what do you think?