Now things are getting reasonable

Now things are getting reasonable

As a perspective new home buyer – I’ve been sitting on the sidelines for about 2 years (well, saving up a good down payment anyway).  The prices during the boom were ridiculous, and as things are crashing, I’m waiting to see if were at a bottom (most experts are saying not likely till end of next year – but they’ve said that for 2 years now).  The latest national S&P Home price index keeps dropping but Portland has fared much better than most.  Lately, however, it looks like we’re no longer immune.  It reported that Portland average prices dropped a record 5% since last year.

Looking on and RLMS database the other night, I actually found several very nice condos and houses in my price range.  It was actually amazing/frightening/sad how many pre-forclosures were in the works.  And how many of those homes were in the 500k-1000k range (I thought rich people didn’t go bust?).  I did the same search about 2 years ago and got nothing but run-down shacks in questionable neighborhoods on the edges of my desired region.  Now I have 10 really good hits right where I was looking – one even had 2 garage spaces (kind of unheard of around here).

But when prices are dropping 5%/year -it definitely isn’t buying time.  At -5% a year, you seriously jeopardize the value of investing in a home.  The whole point of buying is to grow equity.  But, for example, if you have a $200,000 loan who’s home is losing only 5% value in a year, that’s $10,000/year you’re losing in real value.  If your mortgage payment is about $1200/mo, then you are just dumping about a years worth of money down a hole with nothing to show for it.  And any conceivable tax benefit doesn’t really offset that kind of loss.  Yes, if you really need a home, then you might jump on a good deal – but this is hardly a buyers market – even if the latest home stimulus package includes an incentive for first-time buyers (not very useful, it’s a $7500 tax credit that phases out based on income and you still have to pay back, just interest free).

So what to do?  Look for good deals.  Wait until we see some stability and/or growth.  I get the feeling things will keep dropping for the foreseeable future.  And so what if you miss the ‘bottom’?  Well, it doesn’t matter if you catch prices at the same point on the way down or the way up.  I’ll wait and keep saving a better down payment.

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