Q: My wife and I have been house hunting with more or less urgency since this housing crisis began, around 2008. We really expected there to be lots of bargains and motivated sellers. We spent many hours house hunting in several different cities and neighborhoods. We made several offers on homes, and were always outbid. We were really surprised at how many of the homes sold for more than asking, and how few deals there were to be had.
My wife recently went back to work after staying home with our young children for awhile, and we decided to wait until her income can be considered toward our qualifications, so we can afford more. We’ve come to the conclusion that we just aren’t going to find what we need in the price range we’ve been looking at. I feel like all this "buyer’s market" stuff was misleading. Was there anything we should have done differently?
A: No.
On every factor that matters, you did what you were supposed to do. You were an informed buyer and paid attention to what was going on in the real estate market. You positioned yourself to act and then actually did activate your homebuying efforts when you learned about the (relatively) lower price opportunities and incentives like the tax credit that were generated by the housing crisis (for some)/opportunity (for others, yourself included).
Absolutely the only way to know whether what sounds like a market opportunity is, in fact, an opportunity for you is to do exactly what you did — go out, look at houses and make offers. And the only way you ever could have truly found out to an appropriate level of satisfaction that the opportunity would turn out to be illusory, for you, was to get outbid and be unsuccessful.
Many times, agents try to show buyers less expensive homes so they can be competitive in multiple-offer situations, or show them list-price-to-sale-price data that documents that most homes in a given area are selling for more than the asking price. We brokers and agents often wish our clients would take our word (and the data) for it, to avoid the house-hunt heartbreak you are now experiencing.
But when it’s you, and your (prospective) home and you believe you may be in a unique position and a unique spot in time to get a really great deal on a home, it’s only to be expected that you would make every effort to stretch a "hot dog" budget to satisfy your cravings for a lobster-quality home. …CONTINUED
And herein lies a key real estate conundrum of the tax credit and other efforts to stimulate homebuying — governmental and otherwise. As a real estate broker, I’ll claim some responsibility for this: All this stimulus kept trumpeting the "buyer’s market" and the tax credit in an effort to churn up home sales.
While it did help stabilize the market, by whipping up some urgency (albeit mostly on the part of people who wanted to buy anyway), it may have unwittingly created unrealistic expectations about the size of the discounts that are possible. Given that real estate is hyperlocal, buyers in many areas never really stopped facing multiple offers, intense buyer competition and over-asking sale prices, even at the most intense spot of the buyer’s market phase of this cycle.
Lest you get too upset about feeling misled, though, you must also take into account that home prices — and whether they are a "good" value or "high" at any given time — are totally relative to other markets. The mere fact that homes in your area are being sold over the asking price doesn’t necessarily mean those homes aren’t a good deal or that it’s not a buyer’s market. Those homes, even those that sell way over asking, might still reflect a real value if you compare their sale prices to what they sold for before this market dynamic emerged.
What I think we’re dealing with here is a matter of shattered expectations. More accurately, inflated and then shattered expectations. Had you not expected bargain-basement pricing, you might have been mildly, but pleasantly, surprised with the relative discount the prices of the last couple of years have reflected almost everywhere, when compared with peak-market pricing.
Because you did expect massive discounts and that you’d be able to take your pick of homes on the market, you were disappointed. Consider yourself a reality-checked, seasoned homebuyer, now, without the fantasies and illusions you had before. Now — well, when you two are ready — you can really get started!
Speaking of your upcoming house-hunt restart, I would say you’re doing the right thing. Rather than feeling hamstrung, obligated or pushed to buy any home, fast, in order to qualify for the soon-to-expire buyer’s credit, taking a break while you and your wife equip yourself to afford the sort of home you truly want is a wise step.
From what you’ve said, I’m confident that your wise, informed and deliberate approach to homebuying, even in the face of some disappointing circumstances, will pay off, eventually. Best of luck.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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