Buy Alexandria Real Estate: Scraping the Bottom of the Market?

Alexandria Virginia Real Estate Blog

Scraping the Bottom of the Market?

About a year ago, I posted Waiting for the Bottom: Don't Bother.  The advice in that post still holds true and I'll repost the content of that article here.  At the Northern Virginia Association of REALTORS Economic Summit the other week, area economists stated that we are now "Scraping the Bottom of the Market" both regionally and nationally.

Here's a graph tracking average homes sales prices for the past year:

Northern Virginia Average Sales Price

It does indeed appear that after a precipitous drop from December 2007 to January 2008, the market has been "scraping the bottom" throughout 2008, presenting a buying opportunity.

Here's the rest of that article I wrote from last year:

Everybody wants a good deal!

 

 

 

That's basic human nature and the basic rules of real estate, investing, the stock market, and finance.  Buy Low -- Sell High.  You don't make money by buying an item -- whether it be a commodity like gold, a house, Google stock (boy I wish I bought shares a few years ago), baseball cards, or tulips -- at a higher price than that which you end up selling it.  

 

 

 

People always want to time the market and try to get in at "the bottom"  This happens in the stock market as well as in the real estate market.  Stock market gurus are unanimous in advising against market timing.  Instead they suggest that investors dollar cost average by investing a consistent amount on a regular schedule.  Some times you'll be investing at the peak of the market, some times at the bottom, but most times at somewhere in between.  This way you avoid the fluctuations of Wall Street and maintain a consistent investment that grows whether the market goes up or down.

 

 

 

 

Real estate is a bit different.  Unless you are a hardcore real estate investor, you are likely purchasing your home for more reasons that mere appreciation and return on investment.  You home is a place to live, a way to become a part of the community, and for lack of a better phrase "Home Sweet Home."  Additionally, you can't "dollar cost average" your home as you are only buying it once.

Yet almost every day, I (and Realtors across the country) hear homebuyers say that they are on the fence about buying a home, because they are waiting for the bottom of the market.

 

 Well how do you know when the market has reached the bottom?  There's only one way: when it starts going back up again.  When you wait for the elusive bottom of the market, you have to consider the opportunity costs.  If you are planning to live in the home that you purchase for a few years, then you are not shifting any real dollar costs, but rather just shifting the amount of time that you own the house.  The opportunity costs of not buying now and "waiting for the bottom" include the lack of tax writeoffs, paying rent, the possibility of higher future mortgage rates, and the possibility of missing "the bottom" and buying at a higher price.

None of us has a crystal ball and finding the bottom of the market is impossible except in hindsight.

 

The lesson is that hindsight is 20/20.  But trying to time the real estate market is an effort in futility. 

Buy a home when you can afford one and when you feel it is time for you to make a move.  Don't buy a home based on market fluctuations.  In the long run, Northern Virginia home prices have appreciated 7% per year over more than 30 years.  Coupled with living in the Greater Capital area and enjoying all the benefits of the region, that's a great return on investment.

 

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Comment balloon 10 commentsBrian Block • September 21 2008 07:37AM

Comments

Brian-Thanks for sharing your great point of view.

Joe

Posted by Joseph D. Federico, Eastern Massachusetts Real Estate (Donahue Real Estate Co.) almost 10 years ago

Brian,  You have hit the nail on the head!

Posted by Eunice Waller, Working Together, We Can Do Great Things (Berkshire Hathaway HomeServices Simpson Realtors) almost 10 years ago

I get calls daily from consumers who "I want to buy a home but only if it's a super great deal."

Like they are the only one.

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) almost 10 years ago

Well how do you know when the market has reached the bottom? There's only one way: when it starts going back up again.

Thanks for a great idea to blog on...LOL

Short, Sweet and Exactly on point. I'll do it on my outside blog.

Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) almost 10 years ago

Brian, you've got a great handle on those numbers.  With mortgage rates hovering at near 40 year lows, it makes for an awesome opportunity.  In fact, while they're sitting on the fence, they should call their CPA/tax person and see what they are losing by not owning a home!

Posted by Natalie Langford, Winchester, VA Real Estate (Realty Negotiations) almost 10 years ago

I love the graphic showing prices over the past year.  You make some very good points and I suspect you gain some potential buyers with your honest assessment.

Posted by Hope Goss, Ventura Real Estate (Ventura Property Shoppe) almost 10 years ago

You never know.  We have pockets where the prices stay the same or have gone up and others where they are still going down.

Posted by Gene Allen, Realty Consultant for Cary Real Estate (Fathom Realty) almost 10 years ago

I've been through 3 (maybe 4) declining markets.  This is the first where both prices and interest rates are low.  There are some great opportunities!  Great assessment!

Posted by Linda Davis (RE/MAX Home Team) almost 10 years ago

What area is your graph showing?  Is that all of VA?  I don't think you can ever really figure out where the bottom is...you are so right - you won't know where the bottom is till it starts going up.

Posted by Sonja Adams (Samson Proprties) almost 10 years ago

Maybe if we just keep saying this (over and over and over), our clients will listen and take advantage of the opportunity that exists. I have seen some movement over the past week...let's see if the mortgage money comes through.  I have seen some AMAZING deals out there!

Posted by Holly Weatherwax, A Great Real Estate Experience ( Associate Broker, Momentum Realty) almost 10 years ago

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