Why Buy?
By David Curry
I
think I could base an entire blog on what I read in the Chicago Tribune each day. Why I even read the Tribune is a quandary to me, given that the paper reads more like the Huffington Post these days. From time to time I enjoy real estate writer Mary Umberger, although I think she's a little pessimistic on the market, and do think she ignores the real reasons that people buy houses for. And she ignores me when I write to her with article ideas.
Recently she wrote a little pros/cons section on whether or not it's the time to buy a house.
Reasons to buy? High inventory, low prices, low interest rates, etc. Reasons not to buy? Prices still in decline, renting isn't a crime, financing is more complicated, etc. Good reasons Mary, but what about addressing the real reasons that people buy and don't buy? What if, instead of providing biased opinions from those on each side of the argument, we broke it down and really made it easy to figure out if it's a good idea to buy or not to buy? What if some people don't really buy because of interest rates after all, and what's all this garbage about a market bottom? What if people buy because they're confident and don't buy because they're scared and the rest of the reasons are just fluff? If people buy because of interest rates, why did anyone buy a home from 1980 to 1983? Interest rates aren’t the key, market indicators aren’t the key, lifestyle accomplishment is the key.
First, let's get this "market bottom' theory out of our way. I've said it before, and I'll say it again, market bottoms are only easy to identify once they've happened. Look at the stock market. By most accounts, we've been to the market bottom of this recession cycle.
Take a look at a stock chart, or individual stock hi/lows, and you'll see that most stocks hit their 52 week lows on March 5th of this year. Did you buy a hundred thousand dollars worth of stocks on March 5th? If you did, you probably would have turned $100k into $300k pretty easily. What's that? You didn't buy on March 5th? But that was the market bottom! Why on earth didn't you buy? What's wrong with you? I really can't believe you were sitting there, at your computer screen, with Etrade account open, and you didn't pull the trigger on Citi at 97 cents.
See why market bottoms aren't too cool? Because when they happen, there's usually too much fear in the market to encourage buying. What is true for the stock market is also true of the housing market. Market bottoms sound great in theory, but they're just too darn hard to identify while they're happening. Instead of an identifiable bottom, why don't we just focus on a bottom trough, a trough that we're certainly in right now?
Movements to either side of this current point are going to be prevalent, which is why we'll see positive housing numbers one quarter, and negative housing numbers the next. We're in a sideways market, and I'd suggest we're in a market bottom that we'll stay in for another year or so. Jon Stewart fans, mock Jim Cramer all you like, but he's been saying that the time to buy a house is before June 30th, 2009, and he's probably going to prove to be right on the mad money with that recommendation.
So if we're in the market, why buy? Do you believe the market bulls or bears? Do you focus on Mary's 5 positive signs, or are you negative and you prefer to side with the cons? Go right ahead and rent for the rest of your life, and maybe, just maybe your landlord will let you paint a white wall tan. If you ask nicely. What if you just let the 5 reasons to buy and the 5 reasons to wait cancel each other out, and buy for lifestyle. Housing bull? No thanks. Call me a lifestyle bull. A lifestyle bull in a confidence sapped china shop. Buy because that house you grew up admiring just came on the market. Buy because you‘re confident in your job status, and that new development just slashed their prices 35%.
Buy because you really can't stand the heat in the city on the weekends. Buy because cool lake breezes are better than warm alley breezes any day of the week. Buy because you’ll walk a little taller if you live on that street where the Maples high overhead reach across the street and shake hands with each other Above all, buy because you want a better lifestyle for you, for your friends, and for your family, and the purchase you’re contemplating allows you to more easily obtain that lifestyle.
If you need fundamentals to buy, realize that interest rates are unbelievably low, even if they're not 4.5% like Obama told you they would be. Realize that whether or not the market bottoms, you're not going to know when it does. If you're hoarding cash hoping for market bottom balloons to be released from the unicorns in the sky, I hope you have fun swimming in your money vat a la Scrooge McDuck. Just buy because of the 320 months of summer we're all hoping for out of life, way too many of them have already been wasted worrying about 5% market swings, and 5% interest rates.