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For the first time in several years 2009 brings a lull in Calgary's booming real estate market, creating a pause to the advantage of home buyers. Condo shoppers now have selection, time to make a considered choice, and may be able to negotiate a discount from asking prices.
The concern some buyers express, though, is that the market may soften further, so they are waiting and may wait until it's too late, as who knows when the next cycle of tighter supply and rising prices will begin? In other words, we can't know what the future holds, but should take advantage of the market when it gives us some advantage, as it does for home buyers right now.
Some buyers lament that although buyers today have a great selection and find some flexibility on prices asked by sellers, prices are not falling back to where they were two and three years ago. Indeed; and they likely never will. An old saying is that, "The best time to buy real estate is always……yesterday." Sure we shoulda', coulda', woulda' bought a few years ago, but we all invest when we can and where we are. If you missed the last buying opportunity in, say, 2004, the only thing you can do is take advantage of this buying opportunity today. As I've told clients countless times and it's been borne out, "Today you'll lament how much you're paying, and in a few years you'll be boasting to friends about how little you paid."
It is only speculative investors who can afford to wait until it's absolutely clear that the market is again strengthening. They're not shopping for a home, but are only gambling, and can afford to buy now or buy later, or not buy at all. For those who need a place to live, the plunge must be taken, and better sooner than later when you may not find what you want because the best homes have already been snapped up. And so what if a truly tight market and rapidly-climbing prices still take another year or two to return? You'll have bought a home of your choice, may have redecorated it, and will have that security of ownership when prices spiral upwards once again. If values decline slightly in the meantime it makes no difference to your long-term goals of secure ownership and investment value.
When negotiating with sellers in the current market, buyers should keep in mind that sellers often have alternatives to selling at a substantially lower price, just as you have alternatives to buying at a much higher price, be that to continue renting or to continue living in Mom's basement. Let's list the options sellers have, so that you as a buyer understand their position.
1. Rent it out. Most sellers have a price below which it makes sense for them to rent the property for a year or two or permanently. Even if the rental income doesn't cover their monthly expenses of ownership, the shortfall may be balanced by their monthly decline in the mortgage balance. As well, the seller is loath to lock in a loss now when a year down the road prices could rebound.
2. Keep it in the family. Many sellers have a price point at which they might as well sell the property to a family member; perhaps a son or daughter.
3. Leave it empty. Again, to avoid locking in a loss (or even a failure to obtain appreciation), sellers who can afford it might rather leave a home empty and carry the costs, which are entirely tax deductible against their other earned income.
So don't expect miracles on price reductions. Use the market to your advantage for selection, for the reduced pressure to make up your mind before someone else buys it, and for the negotiating room you have on price before sellers fall back on one of the above options. The time to buy is now.
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