Buyers Regret Waiting for Lower Prices
A common human behavior is to seek the most optimal conditions before making a decision to act. A classic example is seen in the stock market, where many folks who want to invest in a particular stock decide to wait and try to purchase the shares when they think the stock has hit a low point. Now, the thinking goes, the investor will buy the shares and then sit back and watch the stock move up. But any stockbroker or investment analyst will tell you that this is a big mistake – it is virtually impossible, even for the sharpest investors, to catch a stock at its lowest point. A common scenario is that the given stock will continue going down after the buyer pulls the trigger. The lesson: Greed kills.
When it comes to residential real estate, professionals in the field have seen this movie play out many times before. As in stocks, waiting for the low point in the real estate market is almost always a mistake for the same reasons explained above. Caveat: I am not saying, by any means, that it is never a good time to wait There are circumstances where it can make sense. But waiting for an absolute bottom in the market is, generally speaking, a losing strategy.
During the Great Recession of 2007/2009, many potential buyers waited for a bottom in a sharply sinking housing market. Those who waited too long for the bottom, were caught off guard when the market came roaring back in 2012/2013, leaving properties that were once desired by many people out of reach financially.
In the south Florida residential market, something closely related happened during the last couple of years. As the Covid epidemic began, home prices spiked in the region. Many people figured that a sharp drop in prices was inevitable. In fact, the opposite happened, and prices surged during this period. Regardless, this is a decision many people are regretting, as prices kept moving up. Now, two years into the pandemic, prices continue to rise, as low inventory combines with a massive move by out-of-staters to the Sunshine State. Many of these buyers, as was the case in 2007/2009, find themselves being priced out of the houses they once coveted.
Now, with home prices skyrocketing, buyers often find themselves in bidding wars or bidding above the asking price. Many who waited too long, are now faced with prices they simply cannot afford. Some are looking o buy in less expensive areas of the state or opting to rent.
Jeff Creegan with Re/Max Services in Boca Raton said, “About 30-40% of his clients in the last year ended up trying to wait out the housing market. Many were wary of buying in the spring or even last summer as they watched prices skyrocket, only to see them rise even more as the year ended. The overall sentiment is that they made a mistake in trying to wait out the market.” Mr. Creegan adds, “Now as they begin to look again, buyers say they’re greeted with homes that are $100,000 more expensive.”
While prices have soared in all parts of south Florida (In Miami-Dade, for example, prices have risen 21% year over year from December 2020 to December 2021), Collier County stands out even within this standout region. In December 2021, Collier County home prices are up a whopping 29.8% during the same period, with a median price of $551,000. Additionally, on average, homes in Collier County now sell in an average of 16 days, compared to 50 days in 2020.
The Lesson: Waiting for the market to hit bottom before buying is a dangerous game, simply because even the best experts in the field cannot pinpoint the bottom – there are simply too many variables. But there are strategies which make sense, even in this elevated market.
If any of the readers of this newsletter wish to explore some of these strategies moving forward, I’d be happy to discuss them - of course, at no charge.