There are a lot of people out there who are in bad shape because they bought a home during the last coupel of years. Some of them even made down payments [resist urge to insert emotocon], and are in much worse shape than the no-money-down types.

By the way, I’m a K-1 person, but Mrs. Smithers is a W-2. It’s not all its cracked up to be.

Smithers – Thank you for the softball comment. You were going easy on me. Yet, I don’t believe I even came close to chanting the “it’s a great time to buy” mantra.

To both Jack and Smithers, and as always, I don’t perceive that we are seeing things so differently. It is more a matter of intent and need. If you are looking at a home purchase through a dollar bill, as strictly an investment vehicle, then waiting for positive indicators makes sense. If you are looking at a home purchase as a personal decision and as a long-term venture, then this is where we disagree.

>if all indicators point downward, buyers should not buy, period, especially if they are looking to stay in the home for a long time.

This makes no sense to me. Especially if a buyer is making a long-term commitment, the effects of market fluxuations will be less significant. Flipping? Probably not a good time to purchase. Investing? San Diego would be a questionable choice for many. Moving with a one or two-year exit plan? Not advisable. But, if I need or want a home and I plan on enjoying that home for 4 to 5 or more years, the story is much different.

The purchase of a home serves many purposes. Those of us who have bought in the past ten years or so have enjoyed our homes as an investment vehicle of sorts in that we have watched our equity grow, yet for many (myself included), I do not consider my primary residence as purely or even mostly a wealth-building vehicle. It is shelter and it is comfort. And, until I sell it, the paper value is funny money.

I completely understand your arguments, but I don’t completely agree. Everyone has different needs and goals, and not all are entirely dollar-driven. The fact remains that precise market timing is a calculated crap shoot and, in the context of the long-term and the larger picture, costs and benefits should be weighed. Your mileage may vary.

For the record, Jack, I agree with your reading on the continuing downward trending. And, if, as you say, the bottom can be accurately predicted, do tell! I have my hunch, but I would love to hear yours.

Bedtime for Bonzo, but I will check in in the morning.

Footnote to Smithers – You don’t have to apologize for the “negativity”. We always appreciate the divergent points of view here. And, for the record, most days I would love to be one of those W-2 folks that you alluded to, but please tell me you weren’t implying that I am out of touch with the annoyances of mortgages and other bills and cash flow concerns. You should know better.

with the bulk of the subprime reset happening right now and early part of next year, and with inventory still at record level and the sales continuing to trend down, all indicators point to continued downward trending of the market.

remember too that NODs mature in 4 months and often not actually on the market for another couple of months after reverting to the bank, today’s NODs will not show up until 6 months later. (btw, October NODs was another record for SD).

while one may not be able to find THE BOTTOM, if all indicators point downward, buyers should not buy, period, especially if they are looking to stay in the home for a long time.

afterall, a $50k drop means $300 less per month in mortgage every month for the next 30 years and $500 less in property tax yearly for as long as you own the home.

It can be easily argued that it’s better to wait for prices to continue dropping until they stabilize before buying. Another $50K-$250K price drop is a huge savings for most folks. That’s after tax earnings for the W-2 types out there. And it’s going to be a lot longer than a month from now.

The “if you’re in it for the long haul” slogan sounds a lot like “it’s a great time to buy”. It’s not. Next year, maybe. (sorry, I don’t mean to be negative on a RE blog, but that’s how I see it).

Price cut down the street – Perhaps, but not in the cases I was referring to. And, as a point of clarification, it would not really be an equity loss. You can only balance the books once the property is being sold. A buyer today is presumably making the purchase with the intent of enjoying the property for some period of time. If I were to have counted my own “equity” every month over the past seven years I have lived in my current home, I would have long ago been relegated to the looney bin. What my home is worth today only matters if I am selling it today.

Buyers wanting a “home” (and not looking for a fast buck) should be extremely careful trying to find the virtual bottom because, as we have said, you only know the bottom through hindsight. If you plan on enjoying the property for years to come, missing the rock bottom by a month or a year or even more isn’t going to be catastrophic. In the long-run, you will have made a sound investment no matter the market. I don’t care how bearish you are – This can’t be argued.

equity losses during the short 1 month of escrow is not unheard of in a down market, especially if the previous gains were based on loose lending and wide spread fraud.

I kind of like that idea. Hmmm…. I am going to mull that one over.

By the way, I spent my formative years in Houston. I bet you are too young to remember “Foamer Nights” at the Astrodome, huh? The light on the scoreboard went on intermittently. If the Astros hit a homer when the light was on, it meant free beer until the bottom of the seventh for everyone in attendance. It would look like a Hoover sucked the life out of the stadium when that happened. Ah, the good ol’ days! (Sorry, I digress.)

Chris – Yes, maybe we have overemphasized or maybe we aren’t doing our jobs as buyer’s agents in making sure the buyer is 100% committed and in love with the home before negotiating the offer. If we spent as much time emphasizing the importance of a legally binding contract as we do talking about all of the ways one might change their mind during escrow without penalty, buyers might be more inclined to take the process more seriously.