I have a delightful crystal ball sitting on my desk here at the office. I bought it from this interesting looking lady at the 7th Ave. Flee Market in New York about 10 years ago. She claimed it has special powers. Recently the ball has been notable in its lack of information……… So, when I hear folks say they are going to wait until the “market bottoms out” before making a purchase and neatly following up with a request that I let them know when this happens, I answer that by the time I recognize the market has bottomed, it will be too late. Here’s why:
The real estate market is popularly noted as a “Buyer’s Market” or a “Seller’s Market”. (If you are a buyer, I don’t have to tell you what market you want to be in - coincidentally the market we find ourselves in right now). In a Buyer’s Market, the Buyer is in control in the negotiation process. Conversely, in a Seller’s Market, the Seller finds himself/herself in control of the negotiation. A graph of the Buyer’s Market/Seller’s Market continuum looks like the letter “U” with the Buyer’s Market occupying the left, descending leg of the U and a Buyer’s Market occupying the right, ascending leg of the U. The curve that joins the two legs together is essentially No-man’s Land. Experience has shown me that it is impossible to tell when No-Man’s land hands the market off to the Seller’s. This transfer of power from the Buyer to the Seller is very subtle - you simply can’t confirm that you have “bottomed in No-Man’s Land” until the curve starts progressing up the right leg.
While this transfer is very subtle, the effect on the Buyer in Nuclear. Mr. Buyer, who has been blithely cruising along in the driver’s seat enjoying the power to write his own deal with the Seller, suddenly finds himself with a new ball game. The Seller, instead of going to the market on bended knee is suddenly seeing daylight. The market is getting stronger – it’s PAYBACK TIME. Now the Buyer, who has been waiting for the bottom before pouncing, is suddenly looking up the mountain at a Seller beckoning for him to “come on up.” This phenomenon is not peculiar to the Real Estate Market. All markets are like this and experts in all each market wisely council that you will never see the bottom because by the time you do, the market has already left you behind and is on the way up!
As a Buyer, where would you rather be: Somewhere on the left leg of the market continuum when the Seller is listening to you very closely; or on the right leg of the continuum when the Seller is suddenly has loftier expectations? Furthermore, interest rates are at historic lows - a factor I predict we will be longing for in 2010. Despite what my crystal ball is indicating (or not indicating), right now just feels to me like a great time to be a Buyer.
