We just closed on a new home two weeks ago. I haven't owned a home since 1996. My wife and I had been renting a small duplex in Michigan. We put everything into storage and went hiking in August 2007 with the idea that we would settle out west. She liked the eastern Sierra region in California---great recreational opportunities. We looked at the Bishop area but value to price ratio didn't fit our budget; so we headed to Arizona with the idea that we would rent for six months and check out the housing market. As anticipated there is a glut of new and old homes on the market. We found one we liked in a new subdivision in the desert 45 minutes east of Phoenix. The house is a new home one year old, never lived in that was purchased by a real estate speculator who got stuck at the top. We purchased it on a "short sale"---not the same as a short in equities or futures. Anyway, went back and forth about whether this was the right time to be buying. I am sure that we are early, I doubt that the bottom is in but we bought at a 25% discount and comparable new home are still priced $40K higher. Is it a good deal? Don't know---ask me in 5 years. We plan on being here awhile, we like the house and we have great views of the desert and mountains out our backyard (photo included). Price always seem cheap on the way down. I thought SUNW was good at 11 way back when.
Killeen Texas not touched as much by the inflated out of control appreciation of homes over past several years. Many good buys! More bang for your buck!
When I think about housing, I like to turn to the "experts". These "experts" are the homebuilders that seem to have a good view of the situation. Although the XHB and stocks like HOVN have made quite a nice rebound, I believe what tolls for the housing market may be different. Here is what the "experts" have to say. Im going to take the "experts" advice and wait until 2009-2010 before snapping up a house: KBHomes 2007 10-K "Based on our efforts in 2007, we believe we are well positioned financially and strategically to navigate through the current housing market downturn and have set a foundation for future growth. However, we believe 2008 will be another tough year for the homebuilding industry and see no indication that housing markets struggling with a significant oversupply of homes available for sale are stabilizing. We believe the moderating sales activity and significant pricing and margin pressures that affected the homebuilding industry throughout 2007 will continue, and may deepen, until current new and resale home inventory levels are in better balance with demand, and it is not clear when this may occur. As a result, we do not expect our delivery volume and related revenues to improve in 2008, and we may need to take additional charges for inventory impairments in the future. In addition, our 2008, and possibly 2009, results may be negatively affected if there is a downturn in the general economy, a decrease in job growth and/or a decline in overall consumer confidence that further prolongs the recovery of the housing markets."
Both the housing futures market and the more credible voices such as Prof Shiller who created the Case Shiller housing index (better constructed than others because it uses same home sales) say 15-30% further declines are ahead Either way, I suggest you do a side by side calculation of the cost of owning versus renting with various house price projections as the key variable over some holding period.
you can look at inflated/deflated prices as dot com stocks.. so.. imagine the knife catchers...jumping in in 2002... it still fairly early, there are things happening on a scale historically that haven't happened before in the financial markets.. so when your dealing with new unknowns, the solution may not be as swift in time and in resources..
if you're buying a house to live in, i would reconsider. just as you can value stocks with a p/e ratio, you can value real estate by monthly costs divided by average household income. by this measure, real estate is still overpriced in many places. however, for investment purposes there are still some places that have decent cap rates because of rising rents.
Here is what I would do. I would take the response of a large number of 100 people among those who make prediction part of their profession (such as this forum). Here is when you should buy: When 80 to 90% of the people tell you do not buy, then buy. That is the only time you are will make a great investment! Just do the opposite of the advice of the majority, and you will be fine.