Trying to “time the market”? Why not buy or sell now – and move on with your life instead? Don’t perpetually wait until tomorrow. If you do, you’re likely to end up with a pile of unfulfilled yesterdays!
Sellers: If you currently own a home, you are fortunate to be in the market and “treading water” with every other home owner. In other words, even though the value of your home has taken a hit in the past few years, so have the prices of other homes you may wish to consider buying – whether you plan to “buy up” to a more expensive property, or downsize to simplify your life. Conversely, if you wait until the value of your home increases again (and it will, according to historic real state trends, albeit slowly over the next 10 years according to many economists), the price of a home you may wish to purchase will likely have increased commensurately. Everything is relative. So, confidently sell and buy again in today’s market – since you’re lucky enough to be “in the game”.
Buyers: Home affordability is substantially greater than it has been in many years. This has been reflected in the uptick of sales throughout the summer. Sales of existing homes rose 7.2% nationally between June and July 2009, and 5% compared to July 2008 – the largest monthly increase in sales since 1999.
Locally, home prices are hitting or have hit bottom in some Boston neighborhoods, and have already started to rebound in others. Let’s take a close look at two of the most popular “upscale” neighborhoods where my practice is largely concentrated: the Back Bay and the South End.
Back Bay prices never really dropped substantially, and the average sales price is – remarkably – higher than it has ever been. A comparison between the second quarter of 2008 and the second quarter of 2009 reveals that the average sale price rose nearly 2%. A similar comparison in the South End shows that the average sales price remained virtually flat. In other words, the South End has “bottomed out”. My hunch is that the Q3 2009 results will be even more stellar.
If you are a prospective first-time home buyer, jump in now! If you’ve been sitting on the fence regarding a home purchase, now is the time. Smart buyers have bought during the spring and summer, and more are buying now. These folks are not waiting until they are completely satisfied that it’s “safe” to buy because “everyone else” is buying – because by then prices will have likely increased in the South End and other desirable sought-after neighborhoods. The problem with timing the market is that changes have often already occurred by the time one is satisfied that they have, and one can end up being left behind. Don’t follow the pack, be a leader instead. Unless you believe your job security is in jeopardy, you’ll be glad you did.
Current 30-year fixed rates are hovering in the 5 percent range – an excellent value. Can you predict what interest rates will look like six months to a year from now? If you can, clue us all in! That said, the current challenge lies in getting a mortgage in the first place. I advise my buyers to first check their credit reports from all three services: Experian, Equifax and Transunion, because it is not uncommon to find that each has different data. Checking all three ensures that inaccuracies are addressed in full, and should be done prior to applying for a mortgage. A credit score in the mid to upper 600’s is no longer acceptable to obtain a mortgage, or a mortgage at an attractive interest rate.
My next piece of advice is to avoid doing business in the near future with national banks and other national lenders if at all possible. There is nothing wrong with these fine institutions per se. The problem is that, in its infinite wisdom, the Federal Government went a bit overboard in trying to protect us from the predatory lending practices of the past that lead to the current housing foreclosure crisis (rarely found in the Back Bay or South End, by the way). The “new rules” now require national lenders to have homes appraised by folks who are not local, and therefore simply do not know or understand property values in our unique downtown Boston market.
Unfortunately, I’ve recently seen potential buyers (over whom I have no control if they are working with another Buyer’s Agent) have their closings outrageously delayed because several appraisals were necessary until one was finally accurate. In the worst case scenario, some properties do not appraise at fair market value at all due to this complete lack of local market knowledge. Until this situation changes, I believe buyers are better off working with local banks or local non-bank direct lenders that are allowed to use local appraisers, and have more control over the mortgages they issue because they have their own funds to lend to qualified buyers, as well as their own in-house underwriters. These lenders are less apt to sell their mortgages to Fanny Mae or Freddie Mac, which is the most frequent trigger for the required use of out-of-area appraisers for national lenders.
If you are contemplating the sale or purchase of a home and you’d like a complimentary market report showing the prices of homes that have recently sold or are currently on the market in your neighborhood, I’ve created a website dedicated to this purpose at www.homevaluesinmybackyard.info.
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Tim Ryan 
