Buy A House Now, Or Wait

Buy A House Now, Or Wait
For Prices to Fall Some More?

Wall Street Journal Real Estate March 12, 2007

By June Fletcher

Question: Is now a good time to buy a home, or should I wait for prices to fall further?

With the housing market on life support, just about everyone I talk to these days is asking some version of this question. So rather than answering for one person in a specific market, I’ll tackle the issue generically.

Nineteen months past its peak, residential real estate continues to weaken, with prices and sales down and inventories rising across the U.S. For sellers, this is ghastly news, of course, but buyers have mixed feelings. On the one hand, after years of bidding wars, instant offers without home inspections and even penning poems to convince sellers to hand over the keys, it’s delightful to finally have choices and negotiating room. On the other hand, it’s a bit frightening to make a commitment now, when there’s a chance that prices could drop even lower.

Caught between opportunity and risk, what’s a buyer to do? Here are some ideas to keep in mind in our current “buyer’s market”:

Buyers, not sellers, set prices. This may seem counterintuitive, but all a seller can do is suggest an asking price. The real price is whatever a buyer pays for it.

In 2004 and 2005, home prices rose because buyers flooded the market — now prices are falling because buyers are sitting on the sidelines. Meanwhile, the number of homes being built hasn’t changed drastically; rather, supply is growing because existing-home sellers can’t figure out what buyers are now willing to pay, so their homes are sitting on the market.

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