First, the inspiration for this post belongs to C.Tann-Starr. She wrote a tremendously refreshing and honest post – Momentum After The Tax Credit Expires? Seriously? Suffering From Lookie-Lou-Itis?
Second, I don’t have a crystal ball. I can only use common sense to look ahead. The only thing I know is this: What goes up, must come down – and what goes down, eventually goes back up. We can also look to the past in order to better see the future.
The year was 1996 and willy nilly I found myself thrown into the housing market. There were no incentives out there, no $8000 tax credits, interest rates were hovering between 7-8%. The country was MIRED in a real estate recession that seemingly had no end. Few were buying – and those that were – were offering low ball after low ball. Homes languished on the market for months if not years.
But I needed to move. I moved back in with my mother when she became ill and now she had passed on. It was time to sell the big family home that had housed three generations of my family.
Why buy in this mess? And a HOUSE no less. Wouldn’t a condo be less risky? Surely prices would drop still further – in a few years they told me – I would be able to “steal a house.” But driving the purchase of a house forward were two issues. I had two dogs – one was mine, one was my mother’s. Renting can be problematic – particularly since my mother’s dog was a “barker.” Then there was the condo vs. house conundrum. Market forces pushed me towards a house when I recognized that home prices had fallen further than condo prices. In fact, at that time I could buy a house for less than I could purchase a comparable condo.
So I bought a house. I bought the house for $245,000. Prices continued to decline for another 18 months. My initial “investment” went down in value during that time. Prices didn’t start to climb back up for another 2-3 years. Then I sat and watched the biggest housing boom in history unfold before me.
The lien on the home now is roughly $160,000. Even after an over 20% correction in our city’s home market…my home is worth nearly double what I paid for it. The likelihood that I would ever be underwater on said house is pretty slim. Prices would have to go back to levels not seen since the mid 1980s for that to happen.
The lesson here was that I bought into weakness. When everyone was scared and staying away, circumstances forced me to the plate and I pulled the trigger.
At the time there were many more buyers that decided to “wait it out” so they could “steal a home.” Many of those lookie lous that held would later look back wistfully at the period before 1998 saying “Those were the good old days! Houses were cheap and there were plenty to pick from. I wish I had bought back then!” They never got their “steal” because they waited until a boom was in full force before pulling the trigger. I got the steal. How? By paying market value for a home when prices were depressed and everyone was running scared.
The fence sitters of today may well look back upon this time the same way people looked upon the mid-90s. For home buyers, these may well be the good old days!
© Ruthmarie G. Hicks – https://thewestchesterview.com – All rights reserved.
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