I’m sure regular readers of this blog see me as a bit of a pessimist, perhaps a little cynical.
After all, I bring the bad news and skepticism quite often on this blog, though I do try to sprinkle in good news as well.
Aside from talking about mortgages and how they work, I like to touch on the state of the housing market, its direction, and whether it’s a good time to buy or sell.
When it comes down to it, there are a lot of interested parties in the real estate world who all want us to buy houses, for better or worse.
So it’s important to ask yourself why you want to buy now, and why you want to be a homeowner in general.
Overall, I’d say I’m cautiously optimistic most of the time when it comes to real estate, especially today seeing that home prices have chalked double-digit gains just years after the worst crisis in recent history.
I Don’t Want to Miss Out
- Buying real estate (or anything) because you don’t want to miss out
- Might be an indication that it’s a bad idea and/or poor timing
- And at the very least not grounded in rational thought
- It could also signal trouble down the road for prices
This past weekend, I was watching the World Cup at a friend’s house who was hosting a little BBQ and viewing party for the Argentina match.
His younger brother was visiting from Denver, and while we were chatting he mentioned the desire to purchase real estate there.
The first thing that came to my mind was that home prices in Denver (and much of Colorado) are at all-time highs. Yes, even higher than during the peak of the previous bubble.
I mentioned this to him, but in an attempt not to completely discourage his dream of homeownership, I asked him why he wanted to buy real estate.
He thought about it a moment and then declared that he didn’t want to “miss out.”
This really struck a chord with me, hence why I’m writing this post today. I immediately let him know that it sounded more like an investment decision than a lifestyle choice.
The fact that he didn’t want to miss out told me that he didn’t want to miss the opportunity to make money, not so much miss the chance to live in a home he owned.
So I pointed that out to him, while also reminding him of the record high home prices in Colorado. The next day I saw him and his brother again and he told me that I completely talked him out of buying a home.
I felt somewhat lukewarm about that because it’s not my intention to talk people out of anything.
I’m just there to give my opinion, and believe me, it’s already gotten me in trouble with the wives of a few friends in the past when I didn’t care for a particular home they wanted to make an offer on.
At this point I try to stay out of it and just be supportive…
Buy a Home When It’s Scary to Do So
- It might be wiser to buy real estate at a time when no one else is
- If others are too scared it might mean there’s more room for prices to climb higher in the future
- The old saying “be greedy when others are fearful” and vice versa comes to mind
- Of course buying a home isn’t always about the investment
I think it’s a good idea to ask yourself why you want to buy a home. If you speak with financial gurus, they’ll often argue that a home is a bad investment.
They’re not necessarily right, but if you simply want to buy a home to make a ton of money, you might want to reassess.
Lastly, I wanted to add that the best time to buy a home (in my opinion) is when it’s scary to do so.
Yes, I’m a contrarian, so I like to do things when they aren’t necessarily fashionable, and those who purchased real estate back in 2011-2012 when it seemed like they were catching a falling knife have been handsomely rewarded.
Conversely, those who are thinking of dipping their toes in today when housing is already widely regarded as a “great buy” might not be so lucky.
The problem with buying a home simply for the investment return is that timing is everything, and if you make your move after the cat is out of the bag, you’ve probably already missed most of the upside.
Read more: It’s okay to rent until you find a home you like.
(photo: Quinn Dombrowski)