“Is now a good time to buy my first home?” is an age-old question that all renters ask themselves at some point. The arguments pro and con vary widely – with some hinging on hard statistics that will show good reason pro and con, and others relying solely on more intangible things like lifestyle, future plans and core values.
The Wall Street Journal printed an in-depth take on this argument pro and con, with detailed and well-sourced points of view from both Eric Lascelles, chief economist at money management firm Global Asset Management (pro buying now), and Gary Shilling, president of A. Gary Shilling & Co., an economic consulting firm in Springfield, N.J. (con buying now).
Their arguments in a nutshell:
Mr. Lascelles: “Investors understand that this is the mother of all buyer’s markets, and won’t last forever.” Conditions are amazing with low interest rates that can be locked in for the life of the loan, ample supply and low prices in most markets. Because investors see this opportunity, they’ve been gobbling up properties for themselves. The open window for average home buyers won’t be there long.
Mr. Shilling: “Buying a house now would be a disastrous investment if prices fall another 20% or more.” The problem is excess inventories, which will continue to pull prices down. Shilling and his associates have calculated an excess of 2 million housing units in the market.
What’s missing here is a deep discussion of the psychology of homeownership, which can’t be dismissed. If renters have it in their heads that they want to buy a home at some point in their lives, they’re most likely going to lean toward Mr. Lascelles’ view of the current real estate market. Why not buy now, when conditions are so good? And with investors increasingly taking up more share of the homes being sold each month, there is a sense of urgency that the days of buyers’ favor won’t be here forever.
What’s also missing is acknowledgment of the completely individualized situation in each local market, and each household. These high-level arguments are interesting, but unfortunately are meaningless to most of the people sitting at kitchen tables making the decisions to buy or not buy. What goes into those decisions revolves much more around the family finances, job outlook, and neighborhood housing market. Sure, savvy buyers will be reading the news and keeping up with how the overall market is moving. But, at the end of the day the national market forecast and economic indicators are not something you see on the average family’s “back of the napkin” short list of considerations for whether to buy or not to buy.
Real estate is local, and individual. Because of this, many attempts to “time” the market by entering at just the right time are either subjective or futile. Buyers are much better off timing their decision with what fits with their own lives.