Add to Your RE Position

Add To Your RE Position BY: Joe DiPaola

When the stock market goes south, what do the market analysts tell you to do? View it as a buying opportunity, and add to your position! The same is true for the real estate market. If you believe that the real estate market is fundamentally sound, then look at this downturn as an opportunity to get in and buy cheap.

The big question has become: when will the real estate market hit bottom? No one can predict the bottom --- but why are you even trying to predict the bottom? Stock market analysts will tell you that you should be in the market for the long haul. The same is true for real estate. Waiting for the "bottom" of a downturn to buy is a difficult/impossible prediction task, unless you have a crystal ball. You wouldn't do that in the stock market---so why treat the real estate market differently?

There are very good reasons to buy now:

Reason 1: Shop for bargains. While the overall market may not stop sliding, certain regions/counties are great bargains now. In my opinion, California has some great buying bargains now. Buy and hold. You win in one of two ways in the long run: (1) demand returns; or, (2) inflation occurs. With the first event, you realize gains as prices rise with increasing demand. This is not likely to happen soon, but if you optimistically believe in a quick recovery, then anything is possible. With the second event, inflation causes your house price to rise, while at the same time you are paying your fixed rate mortgage (always get only a fixed rate mortgage) in cheaper dollars.

Reason 2: When the "bottom" to the real estate market finally comes, borrowing/credit will be extremely tight. As this article is being written, 30 year fixed interest rate purchase-money loans are still being offered in the 5% range. Why wait? Lenders have already started to tighten up standards for borrowers---but there is still time to get in now. It's seems obvious what the future holds for borrowing: (1) rates that can only go higher; (2) qualifying criteria that can only get tougher; and (3) fewer loans that will be 30-year fixed. So, unless you have cash, when the magical "bottom" eventually arrives, you might not be able to take advantage of it!

Reason 3: Improve your position. Trade up! In other words, sell your current house, and buy bigger. You are in for the long haul, right? So why not view this downturn as an oportunity to buy a bigger and better house. Yes, your current house will sell for less---but it will cost you less to buy into the larger home, too. And the difference could be in your favor. But be smart---don't buy first, and then expect your existing home to sell quickly--those days are long gone/ It could take months to sell -- even if you are aggressively priced. Get your current house in escrow before you commit to purchase your replacement home.

Reason 4: Builders are dumping any remaining inventory of new homes-- in apparent panic. Builder panic means incredible uopgrade packages and incentives for you. So, steal a new home from a builder.

The real estate market is slow and painful. A market "correction" was both necessary and expected. But Buyers shouldn't be afraid of it---they should welcome it! Just like the stock market, the "correction" should be viewed as an opportunity to add to or improve your housing postion.

1Listing.com is a California fixed fee Multiple Listing Service (MLS) listing and marketing website for California For Sale By Owner (FSBO) sellers. 1Listing charges only $199 for a listing on the MLS. Visit us at http://www.1listing.com/ or call (707) 693-0100.