Moving Up? Luxury Homes Going at Cut-Rate Prices
Got your eye on an bigger and better house? Now might be the time to move up.
Though prices in many regions are still heading lower, luxury home prices in some areas appear to have hit bottom and are starting to rebound.
Inventory remains high, and the pace of sales continues to lag, so a lot of sellers are motivated to negotiate. And since homeowners themselves may want to upgrade, that gives them even more incentive to sell.
The upshot: there's never been a better time to buy a luxury home at cut-rate prices.
"If you're moving up, it's a bonanza," says Ken Baris, president of Jordan Baris Realtors in West Orange, N.J. "The people that end up buying in this period will be seen in 15 years as the geniuses because they're going to be the ones getting the great buys."
Baris compares the current real estate conditions to the late 1980s, when property values were just beginning a major surge and interest rates were in the 14 percent to 16 percent range. Those who entered the market then were able to refinance their mortgages a few years later when rates plunged, and got more house for less money.
"Now we have that same opportunity for somebody to go to a neighborhood that had been a million-dollar neighborhood, buy a house, and in five years it's going to be a million-dollar neighborhood again," he says.
Yet Baris is not as eager to push people into the market as you might expect for someone who makes his living helping other buy and sell real estate. He remains pessimistic about the broader market's health in the near term.
In fact, he warns that those looking to sell their homes and downsize ought to wait a few years as the value of their homes increase. A home worth more generally will appreciate proportionately higher than a home of lesser value in the same area.
"The expression 'time is money' is more salient now than just about ever in terms of the real estate market," Baris says.
Real estate analysts who had been advising buyers and sellers to wait on the sidelines until the market settled from its precipitous drop in the past two years are now increasingly counseling action, though with a cautious approach on pricing and an aggressive attitude on negotiating.
"For sellers this is still a tough market," says Mike Larson, a housing analyst with Weiss Research. "The buyers still have the upper hand simply because there are a lot more motivated sellers coming to the market every day."
Larson advises buyers to consider properties only where the seller is willing to negotiate. He says there's still a good amount of room left for prices to fall, even though the Office of Housing Enterprise Oversight on Tuesday reported a 0.6 percent overall price increase from January to February in nine regions the office surveys.
"The reality is you want to be very aggressive in trying to find the deals out there and not wasting your time with sellers that are not willing to compromise," he says. "You can find deals in this market."
For sellers, Baris agrees, price is the key. He points out that most homes selling are still within 3 percent of their list value, despite the anecdotal appearance that homes are selling far below asking numbers.
"The smartest thing a seller can do right now is get a very accurate evaluation of what the true current market value is and price it right there," Baris says. "I have scores of examples when properties are priced right in this market, the properties sell like a shot. The sellers that want to test the market do not have a great experience."
As for the longer term, opinions differ on which way the market will head.
Baris worries that the next president will be more tempted to boost taxes, meaning more trouble possible for real estate.
But Denise Evans, who has authored several real estate books and teaches on the industry at the University of Alabama, thinks the election will signal better days for housing.
"I think this is probably the best time to buy," Evans says. "With this amount of talent focused on the issue and the public focused on the issue and the clamor for the elected officials to be held accountable for their actions, I think you're going to see the market go up soon. If you don't buy now, you're going to be buying after the market picks up."