Buying Against the Herd
Taking advantage of opportunities in the
A common issue we see among people today is that they are
unable to take action because they are unsure of the markets.
Most notably we see this phenomenon in the financial and real
estate markets. You know, Bull & Bear Markets, Home Buyer &
Seller Markets. . . Buy Low, Sell High. Heres the thing: if
you are buying in a sellers market, you are by definition
competing against all of the other buyers, or following the
herd. And therefore the herd will Buy High and Sell Low. In
the current market, we see two general situational
First is somewhat obvious. That is, people who want to buy
their first home actually can do it in a buyers market.
Clearly there are issues with qualifying for the cost and
affording the home (qualifying and affording being related but
very distinct from each other). For those who can buy now and
do, chances are they will be buying low. Why? Because the herd
will not be buying.
Keep in mind that although there has been a significant
contraction in the availability of credit (mortgages), for
those who can qualify the cost and rates of mortgages is still
relatively and historically low. We just got spoiled over the
past few years with ultra low rates, payments and qualifying
guidelines. Change is always disruptive and this is a
significant part of why there are opportunities in the current
market. Once the mortgage and credit issues settle down,
guess what, the herd will start moving (and less green grass
for those participating in the herd).
The other opportunity is for current home owners who do want
to trade up. Again limiting this to those people who have
the financial wherewithal, this might be called the sell-low
and buy-(relatively)-lower strategy. Lets say you could have
sold your home for $930,000 a year ago (the median price in
Marin in February 2007). But the house that you would have
wanted to buy after selling was $1.4 million, and from your
point of view, out of reach. Today you could sell your home
for $830,000. If the move-up property came down proportionally
to $1.25M, the increased benefit of transacting now versus a
year ago is $50,000. But we also know that various price
ranges behave differently. So its quite possible (if not
likely) that the move-up property has come down in price
greater than the median. Most people will not take action at
this time herd.
If you own your home, it is more than just an investment. You
make lifestyle choices that impact where you live, a trade-off
in where you spend or save your money, tax implications, where
you kids go to school and convenience. And it is an asset. To
take action on buying & selling when everyone else is doing
the opposite is unnerving to say the least. Clearly this is
not for the fainthearted.
So how do you take advantage if you think this market is an
opportunity for you? Get good, competent, expert help. Discuss
your options with your mortgage advisor, financial advisor,
tax advisor and Realtor. These experts can help you know what
you can qualify for, make an assessment of the affordability,
review the income tax implications and help you assess the
value of the home you are buying.obal Foresight.