Understanding The Two Types Of Homebuyers

Posted by Joe Manausa on Monday, July 19th, 2010 at 11:06am.

There are two types of homebuyers that we assist in the Tallahassee housing market, real estate investors and real estate consumers.

Picture of market uncertaintyThere are some homebuyers sitting on the fence right now, wondering what will happen if they buy a home and home prices continue to fall. They are wondering if it is smart to buy now, or maybe they should wait until prices hit the bottom. I am getting a lot of questions from customers and readers wondering what to do, specifically with how I believe the Tallahassee real estate market will trend over the next few years.

Despite being a real estate expert in Tallahassee for nearly 20 years, I always hesitate to answer this question without quite a bit of preamble. Obviously, I have a view, as I write about the housing market in Tallahassee all the time. But I have also seen enough market cycles to tell you that nobody can accurately predict market timing all the time.

Two Types Of Homebuyers

There are two types of homebuyers that we assist in the Tallahassee housing market, real estate investors and real estate consumers. An investor purchases a home so that the investor can make a return on an investment, while the real estate consumer purchases the home in order to have a place to live. The market timing for the investor is much different than it is for the owner occupant.

Real Estate Investors Have Been Waiting

There is nothing more simple than buy low, sell high. Most homes for sale in Tallahassee are selling below what it would cost to replace them, meaning that when demand returns and Tallahassee begins to grow again, this "cost opportunity" will become a profit opportunity for investors.  Starting in 2005, I began telling investors to "stand by" because prices were selling at levels that I knew were unsustainable.

Within a year, we began to see home prices fall in Tallahassee. Here it is now 2010 and I believe that prices are still dropping, but I also believe it is the time for investors to start checking back into the market. You cannot call the bottom, so don't try. Be a value buyer and you will win in the long run.

Real Estate Consumers Take Action

I wrote a well-received blog entitled Why Now Is Not The Time To Buy A Home in which I listed reasons not to buy a home. But I also can tell you that many people who plan on living in Tallahassee for quite a while should be buying a home. Here are some points to consider:

  • Interest rates are at all time lows, which make buying a home and locking into a payment a wise thing to consider.
  • A home is an investment in lifestyle, as well as for one's retirement. If you plan on being in Tallahassee for a while, have confidence in the long-term history of housing appreciation and start building equity in the home in which you live. Once you pay-off your mortgage, you will have something of value. This will never be the case with renting.
  • Prices have fallen for a record four years.  I believe a fifth year (and maybe more) will occur. But how does this matter if you plan on owning a home for 10+ years. Are you going to force yourself to rent for the next two years so that you can find the bottom? When you do (if you are that smart...), won't rising interest rates reduce or eliminate your gains in monthly payment advantage?
  • If you won't be in Tallahassee in 3 years, you need to rent or be prepared to pay extra for your housing. But if Tallahassee is in your longer term plans, buying a home and enjoying ownership is definitely worth the risk.

The bottom line is buying a home, if for your own personal use, is a lifestyle choice. There are good, valid reasons not to buy now; and there are good, valid reasons why buying a home now is wise. The bottom line in making the decision should be based upon lifestyle factors as well as the planned length of stay in the home.

If you would like help from us in determining your best course of action, we will be happy to assist you.

You have real estate questions, we have answers!

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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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