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Good News if You’re in the Market for Buying a House

by Flexo on March 26, 2008

in Real Estate and Home

Earlier this week, a few real estate market survey results were announced in the media. This could be good news for house shoppers. In January, prices of homes on average were 11% lower than prices of homes at the same time last year. These results are based on the S&P Case/Shiller index, which collects actual sales prices.

Here are the metropolitan areas included in the survey and the associated 12-month sales decline (or increase in some cases).

Metropolitan Area 1-Year Change
Atlanta -4.8%
Boston -3.4%
Charlotte 1.8%
Chicago -6.6%
Cleveland -8.5%
Dallas -3.3%
Denver -5.1%
Detroit -15.1%
Las Vegas -19.3%
Los Angeles -16.5%
Miami -19.3%
Minneapolis -10.0%
New York -5.8%
Phoenix -18.2%
Portland -0.5%
San Diego -16.7%
San Francisco -13.2%
Seattle -1.3%
Tampa -15.0%
Washington -10.9%

In addition to the national price decline, more people were buying houses in February. According to the National Association of Realtors, an organization whose members would benefit from any positive spin on the housing market, sales by homeowners increased by 2.9% from January to February.

I live in the New York metropolitan area. According to the numbers above, our price decline was less than the average, which has me thinking that there may be more declines ahead. Unfortunately, I can’t predict the future. I’m not shopping for a home right now, so I’m not plugged into the market. I don’t have the desire to lock myself into one location for the long-term and furnish and maintain a home, especially on my own. I’m wondering how much longer I’ll feel this way, however.

When I made the decision to settle down, it will not be a financial decision based on market trends. I will buy when and if the right time arrives for me. I’ll try to make the best buying decision at that time while taking the market into account.

Most people moving from one house to another are buying and selling at practically the same time. This negates the basic effects of the market; the disadvantage you have on one side of the transaction is the advantage you’ll have on the other side. If you’re buying your first house, you don’t have the benefit of the flat market, so perhaps the state of the industry should play a bigger role in the decision.

Would you wait for more positive market signs before buying a house — particularly if you’re buying your first house?

Home prices: Down record 11% [CNN Money]
Home sales rise on biggest-ever price drop [CNN Money]

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Tagged as: home, housing, Real Estate and Home



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Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • Flexo-
    This a great post. The overall state of the housing market is certainly more important to those entering or exiting the real estate market entirely as a result of their planned transaction. This obviously includes first-time home buyers.

    A fair amount of sanity has returned to the lending community--a good thing. Prices will eventually return to a level commensurate with people's ability to pay via conventional financing methods. This means the 28% and the 36% rules are back. (For financially savvy buyers, the rules never actually left but they sure disappeared for those who simply followed their lenders advice of "Sure you can afford it.")

    If you're planning on staying put for several years, have good or better credit, and would buy something that you can now legitimately afford, it's a good time to be buying.

    Is it the best time? No one will know the answer to that until it is too late to do anything about it.

    Good luck!
  • I wonder how much of this is skewed towards the lower-income areas. For instance, in Atlanta where I live, the 4.8% decline is probably correct, but there are 2 relatively small niches of the market accounting for practically all of that decline: upscale, overbuilt condos in Buckhead and low-income housing in the southwest part of the city. For everybody else (90% of the population), the housing market is holding up fairly well, if not exactly rosily. I have a feeling a lot of the other markets are skewed along similar lines. In other words, I don't trust these numbers.
  • "Would you wait for more positive market signs before buying a house—particularly if you’re buying your first house?"

    The sign I'm waiting for is that, after buying, there won't be another 10% off sale the next month.

    If I suspect that some retailer is going to have a sale next week on something I want, I'm going to try holding off my purchase so I can take advantage of the sale (assuming I'm not 'forced' to purchase early (say, for someone's birthday gift)).

    As long as I suspect that houses will be a few percent cheaper next month, I'm going to hold off buying as long as I can. This is especially true since it's currently much cheaper to rent than to buy where I live (after factoring in other, longer-term, factors than simply rent vs. mortgage payment).
  • Real estate is inherently local, but even more specific it is "location, location, location." As Kyle said, I think there is frequently neighborhood to neighborhood or even street to street variation in many markets. Places with good job growth and a diverse economy (such as Atlanta) will have very little slowdown despite double digit national drops.

    Real estate prices will always hinge on incomes more than any other factor. If your market is affordable for the average person there is no reason to expect declines. If however your house is out of reach of most local workers then you should expect to face declines until prices are in line with affordability.
  • I would not wait for anything. When a person needs a house they will have to get one. I also think that the number are off for NYC. I have been watching several(20) properties and they have not reduced in price. In my opinion the market here has just gone flat. Homes are not being sold as fast yes, but prices in falling as fast as they are saying.
  • Everyone should buy a house now. Buy two. Especially in Florida. The sooner you buy a house, the sooner I can sell mine, lol.
  • Considering that the same index shows an 80% runup in home prices from 2001 to the peak in Q2 of 2006, I'd say that we have a few more years to go before the market stabilizes.
  • Eli
    I agree now is a great time to buy. I think markets will take some time to recover, and we'll see some stabilization after another 12-18 months. But there is no reason to wait. Smart buyers can find deals now, , but there is no need to hurry. We can use the saturated sales market to our advantage...I wrote a little about this here: http://www.twincommas.com/ready-to-buy-a-home-u...
  • The prices in most areas are not going down. This is a myth. Think of the housing market like a glass of root beer. In some areas the foam fizzed up really high but the majority of areas stayed pretty stable and, though it rose some, did not go through the huge boom. Right now all the high fizz areas are settling back down to normalcy. Soon the market will correct and houses will go up 2%-3% a year like normal.
  • I have to disagree with your statement "Most people moving from one house to another are buying and selling at practically the same time. This negates the basic effects of the market..."

    If I own a $200k home and want to buy a $500k home I need to stroke a check for $300k. If both homes go down 20% (to 160k and 400k), the check I write for the new home is now $240k.

    If I bought the bigger house before the drop I have a new home.
    If I bought after the drop I have a new home + $60k cash, which I think would qualify as a positive effect of the down market.
  • Steve: You're right. I only took into account the possibility of selling a house and buying a house of roughly equal value. Most of the time people are moving "up" in the same area or moving "out" to another area where the market forces may be different.
  • Da
    Uh, Saving Freak, did you even look at the table? Prices in cities from New York to LA are most certainly going down, many in a big way. There's a small swath of the country (mostly the Plains and Mountain West, and South Carolina as you see in the table) that has not yet been hit, but the price drops listed above (up to 19%! And still going!) are affecting the vast majority of the U.S. population.

    The last 10 years is one of the few times in recent memory when nearly every place in the U.S. experienced unsustainable home price gains. This isn't an isolated fizz, this is a crate of Henry Weinhard all going up at once. It's getting messy.

    You're right that the market will correct and then eventually rise, but I'm afraid you underestimate the magnitude of the correction. California Association of Realtors just reported statewide prices down 26% from the peak and still going. Your house is losing you $3000 a week now if you own in CA! That's not a small correction, that's pretty much a crash.
  • unimax
    My city (Houston) does not appear in the list. I don't know if I should happy or not if am planning to buy a house?
  • mellen
    About the housing prices in California going down the most in the country, does that surprise anyone? Hearing what people were paying for houses in CA shocked me. They don't make more money than we do in Boston but they were paying double for a home?! It isn't possible to sustain that level of 'growth' especially in a down market. Boston is expensive but CA makes it look downright cheap to live here by comparison. I think it true that people living in moderate neighborhoods will feel the market correction going on right now less than those who bought McMansions in overpriced trendy neighborhoods but also, people who bought what they could afford and not something to impress their friends will be better off too.
  • Whew! I'm in Portland, and am glad to see that our sales declined by on -0.5!!! I knew we were doing better than the rest of the country, but seeing the comparison really illustrated it. I'm not planning on selling (and then, of course buying) until the market is in much better shape -- so it's good to see these numbers. Glad I sold my house in California when I did, though!
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