Don’t Pop the Champagne Cork Just Yet!

Bank of America’s stock price used to be $53 dollars, then plummeted to $3, and now rebounds to $13.  When put into black and white, the “rebound” has little comfort. I got the same feeling when I read this article about home pricing rebounds at http://news.yahoo.com/s/ap/20090727/ap_on_bi_ge/us_new_home_sales. This is the reality with June’s new home sales figures (seasonally adjusted to 384,000) that came out this week.  Not to mention yesterday’s  Case-Shiller median home price numbers (for the largest 20 markets), which showed a modest improvement from April to May, but still down 17% year over year at $206,000.

When you look at the highs for both new homes sales, which peaked in October 2005 at over 1.4 million homes, and home prices, which peaked in January 2006 at over $260,000, this recent news seems like only a modest bounce off the bottom.

But in a completely devastated housing market, small glimmers of hope are all we can expect. And many housing prognosticators are breathing s sigh of relief that the fall has stopped and stability has stepped in. Don’t jump for joy too high, everything in life is relative.

The good news is that for first time homebuyers and first time move-up buyers, who stay under the magic price of under $500,000 (assume 20% down and a maximum mortgage that conforms with maximum FHA loan limit of $417,000 in most areas), this is a great time to buy a home. Prices are cheap and mortgages are still available. Builders are offering up incentives like never before and the government is chipping in with tax credits for first time home buyers.

If you are renting and have good credit and a solid job, you would be crazy NOT to start looking. Don’t jump and buy the first home you walk through, but take some time, do your homework and make a smart purchase. And remember, this is a buyer’s market. Don’t offer full price, you can always come up. You will be glad you did.
As for the luxury market, this is a probably the best buying time as well. The problem is you’d better bring your checkbook, because the days of putting 5% down on a million dollar home are over. For most people, they have to sell their existing home to get into the new one, and I wouldn’t recommend taking the gamble in today’s market and being stuck with two mortgage payments.  Contingency offers may your best bet. 

In every downturn there are winners and losers, and “success” is a razor thin line. If you own a home now and plan on staying put, then the good news is your value HAS most likely bottomed. The bad news is that it won’t come back to the 2006 levels any time soon. If you have to sell, be realistic, take your lumps and move on. And as I said, if you are a buyer, sharpen-up your pencil and get out there and start looking around, the deals will truly amaze you.

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