Bottom of the Real Estate Market

In an up market, people want to know when the real estate bubble will burst. In a down market, they want to know when the bottom of the real estate market will occur.

You are probably wondering why there is such a fascination with the top and bottom of the real estate market. To be frank, greed has a lot to do with it. No, not the nasty, vicious corporate greed like we saw with Enron. Instead, it is the desire to make the best deal possible on your home.

If you are selling, you always want to sell at the top of the market. Why? Well, you want prices to be as high as possible so you can pull out the biggest gain possible. Conversely, you want to buy at the absolute bottom of the market if possible because you will then gain the most when the market bounces back.

Currently, we are in a down market. Money is tight, foreclosures are up and home values are dropping. If you are a buyer, there are steals to be had. Homes in some areas are being radically reduced. This is particularly true for developers who are now selling some new homes at a loss just so they can use the cash to service the loans they took out to build the new communities.

In this down market, the big question being asked is when will we see the bottom of the real estate market? Buyers are trying to get the best possible deal. Sellers are praying we will hit bottom and start to see values rebound. In short, it is a big deal.

So, when will rock bottom arrive? Nobody knows. The only way to determine the bottom is a few months after it happens when everyone realizes prices have risen, demand is up and so on. In general, estimates range from rock bottom occurring between the present month through sometime in the first half of 2009. How’s that for a slightly broad range?!

The truth of the matter is that much of this discussion is somewhat irrelevant. Why? Well, the entire market in an area tends to move. If my home has lost $100,000 in value, I lose $100,000 of profit when I sell it. That isn’t the end of the world, however, because the next home I buy has also lost a similar percentage of its value, to wit, I am getting it for cheaper than a few years ago. Yes, the loss in values can differ, but not buy much unless you are moving a good distance.

Will the real estate market hit bottom and turn around? Of course. Will it happen this month? Nobody knows. If you see a real estate guru suggesting a specific date, just roll your eyes and change the channel. They have no more accurate of a prediction than does a monkey throwing darts at a calendar.

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