Time to Buy or Sell...?

We cannot always dwell on the fact how much value our property has lost during the past years. We have to accept that 10-15% price increases per year in the early 2000's was just not normal! Homeowners that bought between 2003 and 2006 will have lost equity and that is understandably serious. However, the rest of us that bought before 2003 or even after the housing crisis in 2006, might want to look forward and not miss out on opportunities that lay in front of us.

Selling and buying is a very emotional process but it is not good business sense to say: 'home prices will increase slowly anyway ... so why should I sell now?'

Now we have an opportunity to adjust and to correct our path into the future. It is true, every seller would sell now at the bottom of the market. But remember that "bottom" is still equal to 2003 home prices! Do we really want to wait 10 years (!) until home prices have risen back to 2005 levels, assuming we won't face any additional political headwinds? Sellers will most likely also be buying again. If sellers are trading up, there is just no better time since the higher priced housing market has seen a larger decline than the first-time home buyer market.

Did you know that each %-point increase in the mortgage rate will decrease a buyer's buying power by 9%? Banks calculate 'buying power' on what a buyer can afford monthly. Rising rates means rising monthly mortgage cost for the same loan amount. A rise in interest rates from 3.5% to 4.5% won't be 'breaking news' but it will make a significant difference for buyers and sellers. Buyers shopping for a $500,000 house will find themselves suddenly pre-approved for only $455,000. Contracts with a distant  closing date, because the seller wants their kids to finish the school year, may fall part if that buyer has not locked into a rate and rates are rising. Sellers that don't want to lose their buyers, need to ask themselves what might happen first: an increase in home prices by 9% or an increase in mortgage rates by 1%-point. And sellers that are buying again need not to worry as inventory levels are significantly increasing during every spring season.

The unsold inventory, houses that are on the market now, is at its lowest levels since 2006. At the same time, buyer traffic is up. As of Jan 31, the NJMLS is reporting more visitors than at the same time in 2012 (+11.4%), that are seriously looking (+32% more page views) at less inventory (-21.3%) because there are more homes under contract (+12.5%) and more homes sold (+15.5%) reducing our unsold inventory from almost 9 months supply in Jan 2012 to 6 months this year. Sellers should also know that once the backlog of buyers is decreasing, we will see less anxiousness to buy because the buyer's mentality has changed in general: A home is less perceived as a (save) investment but more as a place for family. Home prices over time will only slightly increase with more homes on market and therefore more competition. While a home owner may be waiting to list the house, the cost of constant home repairs and maintenance will outweigh the increase in home value. Sellers that list at a later time will meet less anxious buyers and will  experience what they waited for at the time they purchase their next home - higher home prices.

There are of course always good reasons to wait. The proceed from the sale will not cover the mortgage, the seller is downsizing from a multi-million dollar home to a very small home or there is simply no need to sell because circumstances have changed. Every situation is different and needs to be analyzed.

(Individual Market Condition Reports by town available under Glen Rock Community Profile at www.myBergenHouse.com)