Monday, June 30, 2008

Buy a House Only If You Are Ready

Here is a recent article I read in the Los Angeles times by Liz Pulliam Weston. Liz hits in on the mark with her answer to a question asked by a reader.

Buy a house only if you are ready

Dear Liz: As a first-time buyer, I'm wondering: Is this the right time to buy a new home? Based on current economic indicators, house prices may go down further. When do you think is the best time to buy?

Answer: The best time to buy a home is when:
  • You have a strong desire to be a homeowner.
  • You are financially prepared and can afford the costs of a home.
  • You are ready to stay put for several years.

Liz also states, "The best time to buy a home is when you are ready, regardless of the market. That said, if you buy now, you must be psychologically prepared for your home to lose value. You could wait until prices start to rebound - but you may lose out on low interest rates or some great deals."

I've been recently reading that interests rates will start to rise as the bottom of the market nears. I'm also noticing that single family homes in Reseda, Van Nuys, Lake Balboa, and North Hollywood priced between $300,000 and $500,000 have hit the bottom and are now selling with multiple offers.

It's important to note that not all areas decline the same. For example, single family homes in Sherman Oaks have declined and average of 25-30% while in Reseda, home prices have fallen between 45-65% since the height of the real estate market.

It appears the areas which are holding ground are Studio City, Toluca Lake, Sherman Oaks, and Encino. I believe most of the wealth in the valley in concentrated in these areas which in turn is why we don't see big price declines.

Homes prices above $500,000 are still declining but with the lower priced homes starting to sell, it will probably be a matter of months until they find their footing and bottom-out. This should probably take place by the end of the third quarter or worst case scenario, at the end of the year 2008.

Now is the time to buy and hold. This is exactly what the investors are doing. Interest rates are still low but will probably rise later in the year and into 2009.

Written by: Richard Johnston, RE/MAX

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