Not too hot for hesitation
Homeowners must study real estate trends, laws and regulations before big decisions
By Joanna Beresford 12/10/2009
As soon as I saw the headline of Steven Goldberg’s story on Kiplinger.com, “Don’t Buy a House Yet,” I immediately crossed “new house” off my Christmas shopping list. Goldberg’s premise: “When housing prices hit bottom, they will languish near those low levels for years to come. So don’t be in a rush to buy.”
He first reviews the current state of real estate affairs, which we’re pretty much familiar with at this point: mortgage interest rates at 50-year lows, tax credits extended through April, a possibly reviving economy, and a potential rise in home values on the distant horizon.
Then Goldberg respectfully advises caution. In a market that has exhibited the calm, cool and collected behaviors of a raging meth addict over the last five years, his advice should be worth considering. People who have to buy and/or sell, because they’re moving or dying or otherwise committed to life in a different realm — of course, they’re going to buy and sell out of necessity, or willfulness, or whatever. But Goldberg wags a thoughtful finger of prudence toward people who may be caught up in the hype of get-it-now-while-it’s-not-hot. Here’s where I find his assessments and admonitions so fascinating.
“The housing picture is complex — and frightening,” he writes. “House prices have plunged 30 percent, on average, from their 2006 peak. But from 2000 to 2006, average prices nearly doubled. That means average house prices are still almost 40 percent higher than they were a decade ago. Forty percent is a healthy increase — even in a robust economy… And the economy, of course, is anything but robust.”
Maybe it’s just me, but I experience this statement as a wild ride in itself. Isn’t Goldberg’s depiction of real estate realities just the most Alice in Wonderland kind of breathtaking drop through a wormhole of fluctuating facts, figures and all the anxieties that accompany such rapid change? I read these words and I wonder, when exactly did I sip from the “Drink Me” bottle. But then, it’s not so much his use of language that makes my head spin; it’s the crazy kaleidoscope that he (accurately and simply) describes that tilts my kilt.
“What’s the value of value?” I overheard that question posed recently by a guy who specializes in predicting the future of business, social custom, education, pretty much everything. Nowhere is this question better applied than to the concept of hearth and home. What do you want, what’s it worth to you, how many other people want it, how long will you want that for?
Patricia Powell, of Powell Financial Group, headquartered in Martinsville, NJ, advises clients to inform themselves about the particular real estate laws and regulations in their state before making big decisions — about, say, walking away from an existing home, or investing in a new home. Powell notes that 12 states (including California) operate under nonrecourse lending statutes, which guarantee that lenders cannot come after home owners who feel compelled to walk away from homes and mortgages that have ballooned beyond the owners’ capacity to pay, manage, whatever. She emphasizes the significance of regional and state-regulated variables, and she stresses the now-more-than-ever importance of credit. I think what she’s trying to say is that we should all try to maintain sterling credit histories and that we should be smart and informed about the particular financial and real-estate-related landscapes in which we live, buy, sell.
Goldberg in essence agrees with Powell, when he notes that “a nasty regional recession triggered each” of the most notorious real estate busts in recent history.
All news is local news. Blah-blah-blah. Who hasn’t heard that age-old, sage insight? Yeah, but I think it applies to present real estate conditions, and to the momentum of our lives within that framework. In California, if you’ve gotta ditch your home, that’s a heartbreaking scenario, but it won’t involve police raids, IRS inquisitions, a total lifetime of irredeemable shame and debt. Maybe just a smattering of such things.
“True, the tax credits and low mortgage rates make buying a house tempting today,” Goldberg sums up. “But if you buy into a slumping housing market, those incentives won’t add up to much. So, while the worst of the real estate decline is surely behind us, the odds are strong that you’ll be able to buy later at the same price — or a lower one.”
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