Waiting for the Perfect Time to Buy

A buyer recently told me she was waiting to buy a house. She had a plan and had been working it diligently for over a year.

The plan was to save enough money for a decent down payment, wait for an expected promotion and increase in salary in early Fall, then start looking in October, be under contract by November and in her new home by Christmas.

Everything went exactly as it should. Her down payment is earning interest in a money market and her new position in her firm came through on schedule. But she’s not buying a house. She’s not even looking.

So what changed? The market did.

The more she hears about sales prices plummeting, foreclosure rates rising, and interest rates dropping, the more she feels compelled to wait.

Wait for prices to drop further. For interest rates to go down even more.

She says she feels paralyzed by the fear that she’ll pay too much. She asks me (and everyone else) if we’ve hit bottom yet. She’s convinced that the perfect deal is on the horizon, but she’s just not sure where that horizon is.

She’s even afraid to go look at houses, afraid she’ll fall in love with a house and buy too soon. Intellectually, she knows that prices aren’t dropping by any huge amounts in the neighborhoods she likes — softening yes, but certainly not plummeting.

When asked what the “bottom” looks like, she doesn’t hesitate, “It’s that point where prices and interest rates go as low as they’re going to go.”

I pointed out two things. One, the only way to recognize “bottom” is when things start going back up again. Bottom is only known through hindsight. Two, interest rates and house prices rarely work in tandem. They are much more likely to pass each other, each following its own path. Each hitting its lowest point at the exact same time seems more fantasy than reality.

There are downsides to waiting that are seldom pondered.

As prices start their inevitable climb upwards, sellers will be less likely to negotiate on price, closing help, repairs and other concessions.

As prices go up, buyers anxious to buy before they go up too far are more likely to end up in a bidding war.

Prices go up because demand increases. increased demand leads to fewer homes on the market. Fewer homes on the market lead to higher prices and less choice. And the cycle starts all over again.

When is a good time to buy? Now. Interest rates are excellent, sellers are more inclined to negotiate, and there are plenty of houses to choose from.

© 2007 Susan Pruden.

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