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The Right Time to Buy

On Monday we posted a survey asking our readers: "When is the right time to buy?" The response was fantastic and I have learned a lot from this process not the least of which is our readers like sharing their opinions and we should ask for them more!

The survey had 5 simple questions and 168 responses. Perhaps the questions were too simple, but I was trying to get a message across. When asked: "When is the right time to buy?"

• 96% said when inventory is high
• 98% said when prices are low
• 69% said when interest rates are low
• 96% said when there are few buyers to compete with
• 97% said when you can afford it

All in all the responses are not surprising. The only skewed answer is "when interest rates are low." Since most people have to get a mortgage, it makes sense to buy when mortgage rates are low, but those that don't need a mortgage or have a very large down payments feel they can get a lower price when mortgage rates are high. You have to keep in mind that a .25% rate hike can take about a 5% price drop to equal out, so it takes a much smaller changes in rates than prices to impact affordability.

When asked: "If you wanted to buy a home in the next year, when do you think the best time to buy would be?" most people chose the second quarter of 2011, stating the longer you wait the better. It seems there are a lot of "wishful thinkers" out there that think prices are going to drop substantially. I'd like to point out that in 2008 we had a global economic crisis and prices only dropped a few per cent. I'm not sure what they think is coming that will bring a 20% or even 40% drop, but if it comes I don't think they'll be happy in the end since we'll be in the middle of a major melt down.

I think it's funny that people like to buy when prices are on the rise instead of falling. They feel that if prices are falling and you wait you will get a better price, but if they are rising and you wait you will pay more. There is another side to that though, if prices are rising all the other factors in the market place are not in your favour as a buyer (except maybe interest rates) - there is more competition, less to choose from and less room for negotiation.

10% said the best time to buy is between now and September:

• Because the conditions in questions 1-5 are in place right now...
• There is a lot of inventory at this time to choose from.
• Inventory is high right now, so when sellers start to pull off their properties, (at that very moment), which is obviously the key, is when you whshould buy.
• Inventory is high, buyers low, prices have dropped to a realistic level for the most part. No competing for the same house.
• Can't hold out much longer. If we don't buy a place soon, she's gonna leave me...
• high inventory, seasonally low sales
• When your in a real estate market where inventory is sky high and sales are low its not a good time to sell but not its not easy to predict.
• Typically, the summer slows down for home sales, and it might be easier to find a seller who is willing to negociate.
• Interest rates are low. Inventory is high. Economy is bound to pick up eventualy.
• Lots of inventory out there right now and won't pick up much the rest of this year. People will be getting a little more nervous yet. I would love to buy right now but would have to try to sell my home in this market as well.

33% said between September and the end of the year:

• I would guess with the back to school season, and winter approaching, there are less buyers in the market.
• Inventory/fear up in the fall. Q1 2011 will be good too, until the snow melts. I think we're going to see shaky stuff out of the US and the EU that'll cause the BOC to slow the rate hikes, and they've learned from the US that hiking rates doesn't necessarily slow the housing market. (Chris Davies)
• I think high inventory, low sales are just starting to have an affect on prices. Usually there is a lag before prices are affected the most. I think there will be a period in the next 6 months that will make it a good time to purchase a house (assuming you can afford it!). Inventory will remain high enough for a decent selection and prices will have softened. Beyond that I will think you will see a rebound as inventory falls (people who don't need to sell will pull off the market, others will try and rent to wait another day...). I could see this rebound playing out similar to 2008 which is why you will need to be ready to jump on the weaker prices, otherwise you'll be waiting for the cycle to play itself yet again.
• People are less willing to move during the winter and/or before Christmas. They'd rather wait a few months and sell in the spring. So those that are selling in the fall, want to sell.
• Sales are slower in the fall. There will be fewer buyers and high inventory. Look for the vacant property and you will find a deal. Get a good deal now while interest rates are still low. We sold in 2007 and have been renting ever since. Sell when the masses are buying and buy when nothing is selling.

18% said first quarter 2011:

• The markets are traditionaly quiet after christmas and before Esater
• A lot of people have school concerns resulting in market churn in Feb.
• Buyer may be able to get a good deal in winter.
• Historically edmonton house prices and sales are low in Q1 relative to the rest of the year. Drawback is sometimes there is a lack of inventory at this time so finding the right house could be difficult
• summer move in
• I think you have to consider why you are buying. Is it a flip, a primary residence or a rental. Most realestate if purchased for the long term will be a good investment either way. You can never really "afford" to buy but at the same time if renting you can be making an investment vs paying off a landlords investment. I think buying in the first quarter is good as less people are inclined to go out in the cold and search out a purchase which would leave sellers with less interest leaving the buyer with more of a negotiating position. Naturally this only applies to the great white north.
• In Edmonton, good selection and limited competition makes winter good for time, selection and negotiations.
• if your looking stricktly on price the best time to buy is in the winter, Houses sales are generally slower in the winter...
  If you are looking to buy for the actual property, then between now and september would be the best time you can see the condition of the yard.
• usually weather is bad so alot of people not looking but also alot of people do not have product on the market but the ones that do are serious about selling and not feeling out the market
• Usually less buyers and you can get a possesion in spring and easily rent it
• Sellers who list before Spring are more serious about selling,
  and likely to price their homes well.

39% said second quarter 2011:

• A natural influx of properties onto the market due to fairer weather. Would be the best time feasibly to have the pick of the crop as people wait until Spring before listing.
• Lower prices in 1st quarter; but more inventory in second quarter
• the later the better, it's all down hill from here!
• I would have chosen 2012 if it was an option. I think the next 12 months will only be the start of the decline!
• I will probably wait even longer (even though I can afford it). I don't think we've come close to the bottom yet...
• I feel like we wont see the bottom of the Edmonton real estate market until at least 2014. I'm happy to rent a place until then, rather than rent the capital needed to purchace real estate from the bank.
• I would pick 2013 or so if it was an option. House prices are going to melt over the next 5 years of so, down by about 30-40%. Only an idiot would buy a house this year.
• It was the furthest out time period. It's not rocket science that prices will now continue falling (both nominal and real) until at least mid-decade.
• I guess price is on the falling side, and 2nd quarter 2011 is the last time frame in choices.

From those responses I'd say the people who said September to December of this year had the best arguments. Q1 2011 makes sense as well but from an inspection and 'knowing what you're buying' point of view, looking at the home without snow is preferable.

Other comments included:

• The best situation is to buy a house you can afford (i.e. small mortgage or no mortgage) and for there to be high interest rates that keeps people without money out of the market, which reduces demand as well as prices.
• Why would i buy when prices are getting lower each day
• Fundamentally when I'm looking at buying a house I contrast the purchase costs with the costs to rent an equivelant house. My rule of thumb is if a house is priced significantly more than 15 times the annual rent then I would probably be better off renting. Also, I answered that it is best to buy when interest rates are high. In my opinion the way to "win" the house purchase game is to buy a house when interest rates are high with no mortgage (or a small mortgage). The high interest rates would keep the people buying who would be using mostly debt to buy their house out of the market, which lowers demand (and housing prices). If you buy during a interest rate peak, when the rates go back down the debt slaves will be able to re-enter the property market, increase demand, and your real estate assets will appreciate. If you buy when rates are low (like now), it is more likely that the reverse would happen.
• Because it will take sellers time to realize that the glut of listings means they're charging too much, and a couple of interest rate increases are going to scare the over-leveraged VRM holders enough to create some motivated sellers. (This makes me doubt my answer to Q3. All else being equal, low interest rates are more affordable than high. But higher interest rates create a downward pressure on the price. Six of one, perhaps.)
• The most important question is #5. The rest is just semantics. Buy when you can afford and build yourself a home from that property

All in all the right answer to the question is when you can afford it. Thanks everyone for taking the time to answer our survey! If you have a suggestion for a future poll or survey let us know.