Mood of the Market
Mood of the Market
You've possibly noticed that there's an election afoot. And if you are one of the billion folks with a Facebook account, you might have noticed something else: the sometimes surprising political leanings, ideologies and even rantings of the people you thought you knew so well.
As much as most of us hate to be predictable, the fact is many of us do hold beliefs and values that fall more or less neatly into a political bucket, whether conservative, liberal or moderate.
As I see it, the recession had a similar effect with real estate. It revealed the real estate styles of each one of us much more than we even knew.
Though generalizations can be pitfall-prone, I've found that being conscious of your inherent philosophy on real estate can help you (a) take steps to do the research and create a decision-making process that dials back the undesirable effects of any extreme tendencies you know you have, and (b) account for the differences between your style and your mate's in advance of big blow-ups and clashes that come up at the most inopportune times, if you let them.
Here are some insights to help you figure out what type of real estate consumer you are:
Conservative homebuyer: Some of the most conservative real estate consumers I know are those who simply threw in the towel during the recession, avowing that they would simply rather remain renters-for-life than endure the ups and downs of the market. But that's certainly the far right -- for the most part, conservative real estate consumers are simply characterized by their aversion to financial risk and their relatively modest hopes and desires in terms of what they look for in a home.
These are the people who:
Course-corrections/things to watch out for: These folks generally don't end up in bad positions, financially, on their homes, but they can end up costing themselves money in terms of missed opportunities from waiting so long for the bottom of the market that they end up buying only after prices start going up. They and their families also miss out, often, on the opportunity to enjoy their homes as much as they can and should, by placing the discount potential ahead of the actual characteristics of a given home.
Conservatives are susceptible to becoming obsessed with the market and fixating on interest rates, kicking themselves and further making themselves miserable if they don't buy at the absolute bottom (which is nearly impossible) or lock their rates on the lowest day they can remember -- even if the rate they do lock costs them only $2.35 more per month than the day they woulda, coulda or shoulda locked on.
These people should get clear on what they and their families truly want in terms of the lifestyle they want to be able to live in a home, and really revisit this list thoroughly before compromising based on price. They should also ask their agent for help staying focused on the comps: Sometimes an over-asking-offer price is still a good price compared to a home's fair market value, if the sellers priced it low to start.
Liberal homebuyer: At the extreme end of the liberal real estate spectrum are those who saw the recession as an opportunity to double-down on their belief in the long-term viability of American real estate as an investment. These folks scraped up every spare cent they could lay hands on -- credit card advances included! -- to buy up foreclosures and hold them for the long term.
Less extreme liberal real estate consumers are the category that was most impacted in the real estate recession, because of their tendency to overextend themselves, buy the biggest and best house someone -- anyone! -- will give them the money for, and to jump on the bandwagon of the day, whatever that is (buy, sell, walk away, refi, etc.).
Liberal homebuyers tend to be characterized by the following sorts of actions:
Course-corrections/things to watch out for: These folks are served well to get a financial planner involved in their money matters well in advance of trying to buy a home. They can use professional help in understanding the long-term financial impacts of their decisions, and in setting up personal discipline and good habits around saving, investing, spending and how they use credit before they even take the step of buying a home.
In some ways, these sorts of folks are served well by the relatively conservative post-recession lending climate we're in -- the fact that lenders require hefty cash reserves and are no longer making interest-only, short-term ARMs is actually a good thing for these folks.
What's Your Home Worth?
Why in-house lenders are ineffective