In the movie Braveheart, there’s a memorable scene where Mel Gibson’s character instructs his men to “hold!” The Scots devised a scheme to dismantle the English cavalry, but it would only work if they waited until the very last moment to strike. With the English cavalry bearing down, Wallace and the Scots probably felt pressured to unleash their plan prematurely, but this would surely have caused it to fail.
Like the Scots, many Americans feel pressured to buy a house in this inflated market because “children need a home to grow up in.” This is the emotional plea that you will typically get from the National Association of Realtors (NAR) and organizations like it. They play on your emotions, so you foolishly buy into the propaganda even though homes in many areas are more expensive than they were in 2005-2006. I’m of the position that kids do need a house, but buying one in this second housing bubble is just foolish.
Home ownership now sits at approximately a 50 year low, and that’s because homes are still too expensive for the average family to afford. Several months ago, a housing economist from Zillow reported that it is still a seller’s market with high prices, low inventory, and even bidding wars. Call me crazy, but I’ve always wanted to buy things when they’re on sale. In many ways this market is more expensive than the one before the 2008 financial crisis because real wages have declined and the net worth of most middle class families has been cut in half.
According to a recently released NAR report, existing home sales for February 2016 were down 7.1%! This could be the start of the softness that I have been looking for, but by no means does it mean that renters should commence their house hunting. Continue to stay on the sidelines while keeping a watchful eye on home prices in your area. I like to save homes on my Zillow app and check back periodically to see the settlement price. Although there is little inventory, and listings are moving fast here in Northern VA, homes are usually selling below asking and well below the “Zestimate.”
Like children who have been promised candy, most Americans want it and they want it now! But if you can have the discipline to “hold”, then there is going to be a handsome reward for you after this second housing bubble bursts.