Is it a good time to buy? Well, generally speaking I say "No"! Why? Mostly, because in this market, at this time, most people are speculating what will happen to home prices moving forward. Some, so-called experts, those likely working in the real estate industry argue that prices have not been this good in a couple of years or more. While that is mostly true, that does not mean that prices will not go lower and certainly does not mean prices will go up from here. Price direction has three paths to take. Up, down or sideways. With the glut of homes already for sale and with foreclosures still yet to be marketed, prices have little reason to go up. If you need to buy, can afford it, and plan to stay in your home a while, then I see nothing wrong with buying a home now. Interest rates are still low and with a longer time horizon, you will likely wait out any short-term price volatility. Otherwise, wait a little longer to see what the next several months will bring.
Will foreclosures have a sustainable impact on home prices? Short term..Definetly! Long term (more than two years) Definetly! Here is why. Take the local market, Tucson, were there were 4,471 foreclosures filed in Pima County last year. This year, I believe we will surpass last year's mark and here is why. Banks will not want to carry forward losses from previous quarters indefinetly. This looks bad on their financials and carrying losses for extended period discourages investors and grabs the attention of regulators. I expect the banks to continue to increase the load of foreclosures in the coming quarters in an attempt to divest themselves of the large red-ink flowing from their mortgage portfolios. Since many markets already have a glut of homes for sale, added competition from lender owned properties is a terrible prospect. Even more daunting is the fact that banks will not settle for their properties to sit on the market for long. As a result, the will be pricing their inventory to sell quickly. The good news... Again, m ost lenders are already writing of losses and will not want to carry out the recordation of losses for too many more quarters. This means that once we cycle through the backlog of foreclosed properties in the lenders inventory, the market prices should stabilize and the market can begin a period of basing whereby buyers and sellers can again exchange real property with confidence. If your a buyer, this is a good time to look for your home. Buying foreclosed property can be tricky. But, if you have a good agent with foreclosure experience than you can find yourself a good deal. The bad news... This process will take at least two more years and probably closer to three with the more desireable locales recovering more quickly. If your trying to sell your home in this current market, now is not the time if you can wait. If not, pricing becomes a very important issue since prices are not expected to climb for quite sometime. You will have to tell your agent to look for comparables for REO properties. Whether you like it or not, foreclosures are your main competition right now!