The home price bottom – are we there yet?

That’s a pointless question, and trying to divine an answer to it is a complete waste of your time. You won’t know when a housing market hit bottom until long after it has.

List (asking) prices, as everyone well knows, are not selling prices. Actual selling prices aren’t known until 60 to 90 days (typically) after contracts are negotiated. By the time enough data about individual sales is available to discern a trend the trend may well have shifted. We only know when the housing market has bottomed six months or more after the fact.

Even more to the point, there are many sub-markets, even within areas as small as neighborhoods, and those markets don’t always move in lock-step. It’s often the case that price trends diverge sharply in different price brackets and for different product types. When markets are thin (i.e. only a few homes of a particular type in a defined local market) divining a bottom, even after the fact, is nigh onto impossible.

For many (most?) home buyers the market bottoms when the total monthly cost of ownership does, making absolute home price levels even less meaningful as an index of a housing market bottom. A 100 basis point upward swing in interest rates more than cancels out a 10% price increase when monthly cost is the measure.

One additional layer of complexity needs to be added: the rental market and its likely direction. For many people, the purchase decision is driven in part by a rent vs own analysis on comparable properties. Are we driving ourselves crazy yet?

Asking whether the housing market has bottomed, I’d contend, is asking the wrong question. The right question is this: would you rather buy now if you can get the home you want in the location you want at a price you think may be at or near the bottom once you’ve later learned where the bottom was?

There’s only one way to answer that question, and it’s not by watching market data or list prices. It’s getting out in the market and making bids on homes. In the video above Realtor Bob Darrow recounts his experiences with home buyers who made what he considered ridiculously low offers and seen them accepted.

With interest rates low and inventory levels high and a fair amount of fear still prevailing, perhaps there’s never been a better time to bid. You won’t know until you try.

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