Saturday, January 17, 2009

Open letter to sellers and (their) realtors,

I can no more predict the market and its fluctuations over the next few years than anyone else. That said there are things I know:

  • The economy is not good now, and no one knows how long recovery will take.
  • Home prices will not recover until after the economy does
  • Low interest rates now depress future home values by making higher priced homes seem more affordable than they will be if/when interest rates rise.
  • Prices now are still high when compared with historical price:rent and price:income ratios.
  • Comparables that were sold between ~2006 and summer 2008 are invalid as those sales were in an overinflated/overleveraged market, they can be used only if the seller can acknowledge at least a 10% depreciation from that value and likely 20%+.
  • No matter closing price, I cannot expect any house I purchase now to recover value beyond breaking even within 5 years, longer if the economy does not recover.
  • I cannot expect any changes/improvements I make to the house to increase its value enough to cover the cost of said changes/improvements.

I want to no longer rent. I want a portion of my monthly payments to be “saved” in equity. I want to have a place where I can work on projects, renovate, garden. I want to be able to work on my car at my residence. I want a place to come home to that is mine. These are the reasons I am buying.

I could be very wrong…I hope I am, but I will not forfeit my future for a house that I expect to drop in value, and I will not increase what I will pay based on artificially low rates, further depressing the future value of the house. I cannot expect to live off my home if trouble strikes so I must have a greater cushion in my budget to weather whatever may come.

Jacob Ketter

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