Tough Love and other medicines; part two

Everyone is saying it; now is the time to buy. Stocks are cheap! Now might be the time to buy stock, yet few are buying stocks and equities. Home prices are amazingly low compared to where they have been the last 10 years, yet very few buyers are choosing to buy right now. It’s not as if interest rates are keeping people away. They are fantastic, if you qualify. So what is holding people back from making buying decisions?

It seems that there is plenty of fear and dread going around; that today’s home sales price might end up looking much too high down the road. There is a paralysis among buying prospects that keeps them from paying a dollar today for what they might be able to purchase a year from now for 93 cents. There is still rampant fear that home prices are not rising, but might actually have to fall more to reach the level at which a buyer and a seller can agree on a price. This is not true for all homes listed for sale, of course. Many sellers have come to the conclusion that the only way to get their home into the sold column is to slash the price so much that a buyer cannot resist. After all, between five and ten percent of all the homes listed in the Santa Fe, NM market area are selling each month. That is not stagnation and that is not chump change. There is activity and there are sales. Many home buyers are wise enough to know they have to live somewhere and are not overly concerned with what the value of their new residence will be a year from now, since they plan to live there 10 years or more. But if the potential buyer you know is afraid of paying too much, maybe they only need a place to live, not a place to call home.

Am I wrong to think that everyone has to live somewhere? Motels only work for short periods of time, and your best friend is more valuable to you as a friend rather wearing out your welcome on his couch. There still is a healthy tax deduction for homeowners paying interest on their mortgages. So why not buy now, so you have a place to call home and you have a place to retreat to when the burdens and stress of the world threaten to overwhelm? Who cares what the home will be worth by election day 2012? Were you going to try to sell it that soon anyway, so soon after purchasing? Then don’t buy, as  you are not likely to make any money. But just because it might not make you a profit in a year, don’t bad mouth the purchase of a home in Santa Fe NM as risky. Accomplish all your due diligence and then purchase a home you will enjoy living in. By the way, where is a good place to invest for 12 months and get any kind of return over one percent? Stocks? I personally don’t know enough to be a good picker, and some will soar in value and make a handsome return. Bully for someone that took that risk. Gold? Sure you should have some gold in your portfolio, but nothing is attractive enough to invest all of your assets in, including a home. Diversify, spread out the risks and rewards.

Let us please establish here and now that the home you buy now will or will not be worth what you paid for it in a year’s time. So what? If someone says they know what it will be worth in a year, walk away, because that person is confused. Again, why buy now with plans to sell in a year? Buy now with plans to stay for a while and enjoy and improve your home and environment. That is today’s “tough love”.


Tough Love and other medicines; part two — 2 Comments

  1. Alan, Thanks for the post. I’m happy to report that my husband and I are in the process of buying a home north of Santa Fe. We did a lot of homework before making our selection but in the end the home we found was listed at what we felt was a more than reasonable price and we offered the seller the asking price for the home. This is probably rare in the Santa Fe area market right now–but the seller did exactly what you say in your post, i.e. had reduced the price to a current market value. Fair is fair, and we felt very comfortable with our offer. I hope that this little story might help sellers (set a fair price) and buyers (if it’s a good price don’t try to squeeze the seller for more). Worked for us!

  2. Fantastic! Glad to hear it is going well for you two… as you wrote, there is a segment of homes listed that is priced to sell right away. Its all those others testing the market that are making it confusing for prospective buyers. Welcome to Santa Fe and I hope you will enjoy your new home.

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