I have many clients who are concerned about timing the market. While it is of course very advantageous to buy at the bottom, the reality is that nobody can truly know what the market will do over the next few years. The more important thing for young homebuyers to remember is that property values in the Bay Area always come back eventually, and the sooner you can start making payments on a home the better off you may be.
My fiancée and I recently purchased our first home and being a Realtor, I definitely had concerns about purchasing at the top of the market. We seriously considered renting for a while but when we really crunched the numbers, purchasing made sense every single time. Now that we have moved in, the pride of ownership and happiness and joy of owning our own home simply cannot be measured in monetary terms. Will the value of our home continue to rise? Yes, in fact, it already has. That is not to say we are expecting it to continue to rise. Will prices fall? Probably. Will it fall below what we purchased it for? That is quite possible as well.
At the end of the day, we purchased a house that we could make our home, in an area and price point that we felt comfortable with. This will be a home that we can enjoy for many years to come.
The examples below are courtesy of Jay Voorhees at JVM Lending:
Our database is full of success stories involving clients of ours who squeezed into properties when they were very young and who now have over $1 million in equity.
These people did not “time the market” or do anything unique; they simply bought young, lived frugally and house-hopped from “cottages to castles.”
Here are two examples:
Gwen and Tony’s Story: Bought in Concord 1985 for $150,000 at age 23. Bought in Concord again for $350,000 in late 1980s. Bought in Lafayette in late 1990s for $700,000. Lafayette home is now worth $1.6 million. Gwen and Tony now have $1 million in equity.
Rod and Karen’s Story: Bought in Martinez in 1989 for $212,000 at age 25. Bought in San Ramon in late 1990s for $400,000. Bought in Walnut Creek in 2000 for $500,000. Bought in Alamo for $1.2 million in 2011. Alamo home is now worth $1.6 million. Rod and Karen have $1 million in equity.
Their property values went up and down, but they stuck out the market, paid down their mortgages, moved up when they could, and ended up way ahead. Both actually bought in the late 1980s during a market peak and lost equity for a while. Moral: buy young, stay in, and don’t worry about timing the market.