Build Now While the Opportunity Lasts

As the first months of 2008 quickly come to a close, current market conditions project that the downward adjustment to housing production should complete its course by mid-2008 at the latest, if it has not happened already. This limits the time for consumers to take advantage of their money-saving opportunity as buyers.

It is important to note that housing has always been a cyclical business, with ups and downs. As surely as the market has slowed today, it will start picking up speed again. Although no one can accurately predict the peaks and valleys of the housing market, the built-up demand for new homes is expected to revive the housing market once again – and economists are expecting the turn-around to happen sooner than many think.

The likely boost in the housing market is promising news for builders and contractors, as well as the economy, but potential homebuyers who are still trying to “time the market” in hopes of buying at the trough, are likely to lose out. Meanwhile, those who buy now will have a home they can call their own and reap the long term gains of home price appreciation. For example, those who purchased homes in the early 1990s during the last economic and housing downturn came out as big winners. The median price of a new home in 1991 was $120,000. In July 2007, it was $239,500 – nearly double in price. Buyers who embrace the advantage of today’s current market conditions can expect to garner similar benefits in the investment of a new home.

Author Dan Kadlec described in a recent Time magazine article the benefits of buying now instead of waiting. “Consider a typical home that sells for $218,900. You put down 20% and get a 30 year fixed rate mortgage of 5.5%. Monthly principal and interest come to $994.31.” wrote Kadlec. “Let’s say that 12 months from now that same house goes for 10% less or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs raise just half a point to 6%, your monthly payment would be $994.94 and you’d have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you’d rather not be.”1

For many homeowners it’s hard to understand which reports to believe regarding the housing industry. Many national reports don’t apply to our market; but nevertheless articles and stories on these reports keep appearing in various media outlets. A new website whybuildnow.com will soon be launched. This site will address what is myth and what is reality in relation to our local market. Building in today’s market means that consumers can work with homebuilders who can extend greater care, oversight, contractor readiness, availability, and process speed to their projects because of their lighter workload. Combine this with lower material costs and lower interest rates and you’ve got a winning combination!

1 Time, February 25, 2008 issue, pg. 54.