Maybe next year?

December 2006

Maybe next year?

Home for Sale sign. Original image at http://img2.timeinc.net/toh/i/a/lower-mortgages-00.jpg

A softening market?
For at least the past two months there have been mutterings about the market having taken a turn for the worse. Opinions regarding the truth of it vary. To some believers, the bubble has burst or is well on the way to it. To others, there never has been a bubble and, at most, we're seeing no more than a modest market correction, if indeed there's one at all.
In the US, there are more decided views and there are enough reports of falling prices and lack of sales to support the idea that the market isn't what it was earlier this year, nor does there seem to be much conviction that the situation is only a temporary one.
Whatever the case, it can perhaps be argued that hereabouts -- or, for that matter, in most parts of Canada -- next year might be a good time to buy if you've been postponing the thought of doing so while there's been so much talk about galloping price increases and frantic bidding wars.
However, I can't help thinking that the question deserves some begging.
Indeed, I hold the view that the right time to buy isn't -- or shouldn't be -- market driven. To my mind, what's more important is whether you should buy at all!

Is there a need?
The primary argument for purchasing a home (or any other kind of property) rests on the financial benefits to be derived from owning it. However, this needs to be preceded with a good enough reason for buying in the first place, and this is likely to fall under one of the following broad headings:

a) Financial readiness.
You need to have both the ability to find a downpayment if one's required and an income that will safely allow you to make monthly mortgage payments. Getting in over your head is likely to face you with cashflow problems and the stress that can accompany them. Affordability has to be looked at realistically rather than in vain hope.
b) Personal considerations.
Getting married, starting a family, a pronounced increase (or decrease!) in earnings, and the consequences of children growing up and leaving home or an approaching (or actual) job loss or retirement -- all can (and usually should) trigger a purchase or, in some cases, a withdrawal from the market. Whatever the situation, the need is an appropriate analysis of the effect on your pocket book and the comfort level resulting from the change you decide upon.
c) Relocation
It's tempting -- and not altogether wrong -- to buy something in the new locale, but it may be wiser to rent for a while and give yourself time to become more familiar with the "good, bad, and ugly" areas. Perhaps you'll waste a few dollars on temporary accommodation, but you can probably/possibly recover the amount when you're ready to make an offer on a place that you'll have no reason to regret buying.
d) Investment
Sidestepping the question of whether you're involved in commercial or industrial property instead of a residential one, the key question has to be your objective. Is it income or are you looking for a capital gain? As with the previous points, the sensible approach lies in making haste slowly.

When is the best time to buy?
From a residential standpoint, there isn't much doubt that you're better off buying instead of renting. True, you need to be able to get a mortgage (although nowadays this doesn't necessarily mean you have to have a large -- or any -- downpayment), but if you simply rent a place year in and year out you'll have nothing to show for it when you reach retirement -- unless, of course, you've had the foresight to save up the difference in the cost between the two alternative forms of accommodation. In turn, you have the chance of a gain in net worth, thanks to the (almost certain) steady increase in the value of your home.
Of course, in industrial and commercial properties the monetary considerations can sometimes be rather different. Leasing premises instead of purchasing them may be more advantageous. Your capital may in fact be better invested in your business and earn a great deal more than if it's tied up in bricks and mortar. Think, for instance, of the habit companies have of leasing a fleet of trucks rather than buying them. Or, in a similar vein, think of the call centres that are certainly not located in a company's head office but simply paid for through a contract with some overseas provider.
Neverthless, it makes some real sense to let a decision to buy have its roots in the best way to use your money.

So is 2007 the right time?
Who knows?!!
The one thing that's certain is that, despite the long term rise in property values, the market does have its ups and downs and they aren't too easy to predict. Numerous gurus have a try at it -- as witness the erstwhile warnings of a bubble about to burst -- but the basis lies more in public fickleness, which has been both the making and downfall of countless businesses over the years. At most, we can choose to believe that what goes up will come down, and vice versa, but we're as likely to be kidding ourselves as learning how right/wrong our thinking has been.
No. Timing is a consideratiion, but the greater emphasis ought to be on recognizing the need and then getting value for your money -- and this is obtainable regardless of whether you're involved in an up market or a down one.

But as it's now Christmas time ...
It doesn't matter what your religious persuasion -- or even a lack of it -- happens to be. This holiday season is unquestionably marked by a lot of good wishes and some decidedly amusing messages. One of the best I've received can be found in the page at http://hihi.elmer.org/pics/clickadeer.
I'm sure you'll enjoy it -- and watch for the second reindeer from the right. He's very talented.

With warm good wishes for the rest of this year and all of the next one.