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Should House Hunter Delay Purchase?

Q: I'm house-hunting, but with all the bad news coming out about the housing market, I wonder if I should wait a few months or even years. Do you think I should?

—San Diego

A: If you need a home, then keep looking. If you find a home that suits your needs and is reasonably priced compared to similar homes, make an offer. It doesn't make sense to try to time the market—because nobody can. Unless you plan to stay in your home for only a year or two, you eventually will accrue some equity, even if you buy before housing in your area hits bottom. In the meantime, you will enjoy federal tax breaks, and avoid the rent hikes that are inevitable as demand for rental housing grows, fed by millennials entering the workforce, former homeowners who have gone through foreclosure and would-be homeowners like yourself who are waiting for home prices to fall.

Moreover, there are hopeful signs in the San Diego housing market. If you consider the July data for existing homes released by the National Association of Realtors, San Diego is performing better than the country as a whole—partly because it was one of the first markets to fall when the bubble burst. In the U.S., sales were down 25.5% in July and prices up 0.7% from a year earlier, but in San Diego, sales were down 15.2% and prices up 4.6%. Similarly, according to RealtyTrac, San Diego County is doing much better than the rest of the country when it comes to foreclosure filings, a leading indicator of a market's health. In July, the county's foreclosure filings, which include default notices, scheduled auctions and bank repossessions, reached 5,032, a 37% drop from a year earlier. By comparison, foreclosure activity nationwide fell only 10%.

Still, it's premature to declare that San Diego's market is definitely on the upswing, especially since consumer confidence remains shaky in the face of a weak job market. While the country's overall unemployment rate stayed flat at 9.7% in July from the previous year, San Diego's crept up to 10.8% from 10.3%. Other statistics are troubling, too: According to the San Diego Association of Realtors, the available inventory of unsold homes rose 23.3% in July from the year before, while the number of days homes remained on the market in July increased to 87 from 72 a year earlier for attached homes, and 71 from 69 for single-family homes for the same period. Meanwhile, affordability remains a problem. San Diego remains one of the most expensive markets in the country, with an average attached home price of $266,899 and single-family price of $506,540.

As you can see, the picture is too mixed for me—or anyone for that matter—to say with certainty where San Diego is in its housing cycle. But rest assured that it is a cycle, and that when it does become clear that the market is headed up, buyers will jump off the fence, prices will stabilize and interest rates may rise. So you may as well take the plunge now.

Posted via email from Newport Beach California 92663

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