Volatile Market, declining prices, foreclosures = A good time to buy?
 

I really don't know much about mortgages and the housing market, but I just read an article on Yahoo.com (US Home Prices Drop 11.4 Pct in January: Financial News - Yahoo! Finance) saying that U.S. home prices dropped 11.4%. Doesn't this mean that now would be a good time to buy, assuming that the market will turn around and go up again eventually? Apparently this is the most that housing prices have dropped in 20 years. Does this make any of you think that you might want to buy a house now?

Also, how has this affected you/your parents?

I moved away from home a few years ago, and so I'm really not sure how this affects anyone because I'm not paying mortgage prices, foreclosures, I have no first hand experience... I just pay rent, which is why I'm interested in responses. Thanks.

Whether it's a good time to buy is obviously a personal decision, and depends on your reasons for buying, location and available funds, amongst many other factors. As a general rule, however, I personally tend to think that merely looking at prices and saying 'holy shit they're low now, what a deal' is virtually always a terrible reason to buy anything. An object in motion tends to remain in motion, and a trend in prices, by definition, is more likely to continue than to change.

What I mean is, just because the price is at a historical low doesn't mean that it's at the bottom. There's a reason why the price got so low. Is the reason still valid? If you think that it is, then assume that the price will go even lower. If you think that it isn't, and some new circumstances have arisen that have the force to change the trend, then wait for confirmation in the form actual rising prices before just assuming anything. Trying to call a bottom in the market is very rarely a good idea.

It is a buyer's market right now, though.

If you're considering something like this though, I would wait a little while, just to see how much worse it gets.

It's a nice time to check into foreclosures as well. Banks are trying to upload their assets quickly, and I have a few friends who have seized the opportunity on that wagon.

Yeah, the whole hilarious sub-prime mortgage over there means American banks now have a surfeit of property on their hands which, if left vacant just gets vandalised and falls further in value so they're desperate to sell up. By all accounts you can get hold of reposesed property at criminally low prices at auction over there at the moment so if you have the cash it's probably a decent enough investment. Don't expect any banks to lend you the money though without a decent credit history and probably a sizeable deposit, they're not going to make that mistake again for at least two years...

I'm glad you mentioned that. <3

Banks are only generally giving loans out to, you know, the higher echelon of folks with reasonable credit. I am confident, for example, that I would not be able to obtain a mortgage loan in the current conditions of the market.

But like Shin said - if you've got the money, you've got the certain means in which to make your payments, and you find a nice property in foreclosure or something similar, jump on it.

As for my personal experiences with the market, I am completely debt free, I rent, and I have a decent savings account and investments. The only way I really see any change for myself because of the conditions is in the interest I accrue on my investments.

But other than that, it doesn't touch me or anyone in my family.

Also, if you're looking for a pure investment, buying land is a much better bet than property. Whilst property values fluctuate at the best of times and can sometimes get hammered, land will generally increase steadily in value, particularly with the current and future problems of population increase (More of a problem in the UK than the US, granted but still a valid point). In fact, some conspiracy theoriests are suggesting that the entire financial market collapse was engineered just to lower land prices. Believe what you will on that one...

I think the conspiracy theory is a slight stretch of the imagination, but I was actually thinking of land as an investment in the terms you're speaking in very recently. The only problem is, it seems to me that land fluctuates almost as much since housing prices since every building has to be build on land... who's to say it's the building and not the land? I still think you're right about land being a good investment, I just don't know how to make sure the buildings are the entities that are declining in value at the moment.

Also, I agree with you that many people have lost because they tried to guess how far down the market would go before turning around, but isn't that just because they sold too early? Even if I did buy now, couldn't I assume that the market would go back up eventually?

I wouldn't buy specifically because my state has one of the highest foreclosure rate in the nation, coupled with negative population growth. But it seems to me that a lot of the houses that're being foreclosed on are in places that will suffer the most from the bust, and like it was said before, you really need to think about vandalism and shit from the vacant homes around yours.

But if you were already looking to buy a home I guess now's as good a time as any.

You can probably assume that, sometime down the road, yeah. But do you want to own a home in a place no one wants to live? Even when the bubble was strong people would get fucked trying to sell homes in places no one wants to go.