Monday, January 27, 2014

Conflicting Information on Prices--What to Do?

Yesterday's New York Times Business Section had some very interesting articles on the current state of the real estate market.  One of them took a few homes in different parts of the country, and compared the prices each had sold for at various points over the past twenty-five years or so.  They ranged from homes that had gone up or down very little, to ones which were now above the highest earlier sale, to ones where the value had not regained its earlier level.  This was excellent data, and is measured differently from the more often cited Case-Shiller Index.  The latter index is derived from taking the entire aggregate value of real estate prices in a city or SMSA, and comparing the whole package to the entire aggregate value of sales at another point in time.  That means that you are essentially comparing apples and oranges, although the sheer volume of data would indicate that it might be a pretty good predictor of overall values.

When you look at the history of one home, however, you can clear see the effect of any given downturn or uptick on whatever owner happens to be in place at a particular time, and it's so clear that the market is driving the price up or down, because, of course, it's the exact same house.  The NYT article included pictures, which always tend to make a story more compelling.  What was missing, though, for obvious reasons, was advice about how to apply such information to a personal decision.  How could it say what to do in Connecticut, when sellers all over the country were in such disparate situations?

Perhaps the best answer to the unspoken question of what to do in today's market is to focus on the overall variety of price levels, and conclude that there is no one right answer.  Which is, in itself, good advice:  Don't try to outguess every expert and every real estate seller or buyer.  If all the experts agree, and the whole country is in the same position, you are most likely too late to cash in on the upturn.  If it seems as though results are spotty, you conversely have a better chance, if you're a buyer, of landing a home that will increase in value over the next few years.

By pointing out that similar properties can have very diverse sales outcomes, the article reminds us strongly that a home is, after all, a home.  Buy what you love.  Live there because it enhances your life.  Sell when it's time for a change.  Hope that your timing is good, but don't plan everything on a certainty you can't achieve.  Sometimes people get lucky, and sometimes they don't.  It doesn't mean that you shouldn't be happy where you live.  We don't know what the future will bring, but the present beckons--buying now is a great option if you qualify for a mortgage at current rates, and can buy at current prices.  That's all you can know, and all you really need to know to take that first step!