This is what the true sales statistics show in the San Fernando Valley, where homes sales have been down month over month consistently. It was not until all the national news organizations started to report it in summer of 2007 that most people became aware of it. This is one of the reasons why waiting until the market goes up is a very hard thing to do. Most people do not even realize the turns in the market until either the bottom or the peak has occurred. Unlike the stock market, it could take months or even years until the public, and in some cases, real estate agents, are aware of the turn. One of the things that most people do is look at the sales price of the home. In reality they should be looking at the payment of the house. If you are looking to buy a house that will be your primary residence, and you plan on staying in the home for more than 5 years, it is a great time to buy. I know most of you are saying to yourself, “You’re a real estate agent. Of course you’re going to tell me that.” Here are the reasons why if you buy a house today and finance lets say $500,000 on a fully amortized loan at 5.5%, your payment would be approximately $2,838 per month. Now let’s say that home drops 10% in value but interest rates go up to 7%. Your payment for the same house would be $2,993 per month, not to mention the tax benefits you are losing during the time it takes for properties to go down by 10% by continuing to rent. In the same 5 year period that you would be living in the house, you would be paying the lender $9,300 for the loan.

If you were to have bought a house in November 1997, the median price you would have paid as reported by the Southland Regional Association of Realtors is $165,833. In November 2007, with all the bad news out there of the doom and gloom, the median price was reported by the same agency as being $557,500. That is over 300% in growth of equity that does not take into account the tax benefits of owning a home versus renting. If you take $1,000 a month in rent during that same time frame you paid your landlord’s mortgage, you gave away $120,000. I am sure your landlord thanks you, but wouldn’t you have preferred to put that money towards your home?

When the market does shift, and it will, you may miss the boat again because you were on the sidelines waiting for the news to report housing going up again. Right now it is a buyers market. There is a larger selection of homes and low interest rates, but it will switch to a sellers market again and maybe just as fast as it became a buyers market. Is it possible to miss the next market turn? Sure. It could be a lot easier than you think.

I would advise you to consult with you tax advisor prior to buying a house as these are just examples and everyone’s tax positions is different.

Next month: Why foreclosure is not as good of a deal as you think.