Traditionally, buyers in The Berkshires are pretty scarce from the beginning of November until around mid February. Why? Weather, job cycles, holidays. Some years have seen exceptions such as the winter of '04-'05 and one or two winters during my 34 year career but those are rare. Much more common are the slow winter months when buyers, like bears, hunker down from the cold. If you are considering buying a Berkshire Home this fall what do you need to think about? Read on....
So, is this a good time to buy, assuming you are or know a potential buyer? Absolutely, unless of course, you are such a pessimist that you think the world is still poised to fall off its orbit.
I was visiting with a potential buyer just last night who happens to be one of those fortunate few who seems to always pick her timing right. She sold at the last peak, spring of '05 and is now considering purchasing again, right at what I believe will turn out to be the bottom of this current soft cycle. There are always going to be "deals" to be had, even in stronger market times but now is the time when just about every seller is sufficiently informed about the general state of the economy such that they are likely to be more flexible, and in some cases, more desperate, than under almost any other conditions.
The press and pundits have been using words like "unprecedented", "historic", even "catastrophic" to describe the current state of the nation's and world's economic health. If this is true, and while maybe there has been a little hyperbole used, no one can deny the severe state of the economy. Some of this is the simple result of a previously overheated economy inflated by the usual culprits of greed, irresponsibility and easy credit, returning now to a sounder state, painful as the forced adjustments are to so many.
So, given the realities of today's economy, now is clearly a great opportunity if you are a qualified buyer. Rates are very favorable once again, prices have adjusted downwards by large margins thus boosting affordability, and many sellers are far more flexible than in quite a few recent years. In addition, this last "bubble", which following the tech bubble of the late 90's, was fueled by many speculators and even ordinary folk buying properties to "flip" for profit. Like in all bubbles, lots of people jumped on the real estate train fueling the rapid rise in prices and now due to the oversupply, they are forced to let the air out of the bubble in order to unload.
Mind you, there are plenty of sellers not facing such pressures as the speculators or those who have suffered directly from job cuts, who are willing to "wait out" this cycle. For these optimists, I would point to the stock market for a lesson. The Dow has recently been dancing in the high 7,000's and low 8,000's having fallen from its high over 14,000 giving up trillions in theoretical value and almost a 50% drop. Real estate has not fallen so far but since it took the Dow roughly 8 years to jump from 8,000 to 14,000 and then less than a year to fall to its current level, it could be many years before real estate values climb back to their lofty '05 levels. "Waiting this market out" as a few of my clients decided to do by taking their properties off the market, may well prove to be expensive in carrying costs, lost opportunity costs and loss of purchasing power to inflation and taxes. So, why wait, if selling makes good sense? Only if a seller wants to enjoy their property longer and has no need for the cash and really doesn't care too much about maximizing their results from a sound economic point of view.
But this brings me to one final point for this entry, the point about residential real estate being more than an "investment", much more in fact. It is primarily one's home, refuge, retreat, castle, palace, whatever word you like to use. It is first and foremost one's home. What has changed for many in the past few decades was that homes became "investments", business opportunities for profit, commodities to buy and sell, trade and leverage just like other typical investment vehicles. Greed and human emotions crept in and overtook markets in many parts of the country and globe. If people would take the investment motive out of their primary home and simply enjoy their home, take peace and pleasure in the privilege of owning and occupying their home, we might avoid future bubbles like the one which contributed to the current state of real estate right now.
Do I think human nature will change any time soon? No. If you have purchased your home as a traditional place to live and perhaps work, you will be less disappointed, maybe even happily relieved, that you have weathered this current storm and shed the concerns shared by many who have gone out on a limb.
Residential real estate in my opinion, is best looked at as shelter and protection from economic ups and downs, just as it provides shelter from the elements but when we treat it more like a commodity to be bought and sold for profit, we will be forced to ride the roller coaster of the state of the economy and for some of us, that ride is not all that comfortable.