Home Radio Segments Real Estate Round-up 3 Questions You Need To Ask Before Buying Your Next Home

3 Questions You Need To Ask Before Buying Your Next Home

Terry Story, Questions before buying a home

With Terry Story, 28-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL

Housing Prices Approaching A Top?

The housing market continued to gain strength in 2017, with the final quarter delivering the fastest sales pace all year.  Home prices are still appreciating, notching their 58th consecutive month of year-over-year gains.  That said, Terry notes that many buyers are expressing a tinge of trepidation about and resistance to current prices. The fiery stock market in recent months appears—paradoxically, at least, on one level—to be contributing to the modest increase in conservative sentiment, a raising of antennas that markets may be overbought. To some extent, this resistance to current home prices can be explained as a vestigial reaction dating back to the massive meltdowns in the housing and stock markets in 2008.  Even though low housing inventory is playing into sellers’ hands and adding pressure on buyers to make offers higher than they want to, prices are rising much more slowly than before. Steve avers that he sees only a very small risk of a systemic crisis on that magnitude. He also states that he thinks that a certain amount of skepticism about prices is a sign of a healthy market. It’s natural and perhaps even helpful to a self-correcting market for prospective buyers to take an extra breath and say “I’m not comfortable at these price levels”.  Healthy, rational markets should fluctuate and adjust to accommodate these kinds of dynamics.

Questions Before Buying A Home

Addressing the buyer side of the market equation in more detail, Steve asks Terry to walk listeners through a brief survey of the three questions that prospective buyers should ask themselves before searching for a home. The first question is “Why do you want to own a home?” Casting aside the common answer that a home is a good investment (it may or may not be), Terry presses her clients to be specific: Is it because you want a great place to raise your kids?  A safe place for your family? Do you want a larger place? Do you want more control over your space than you have at a rental?  The next question is “where”—not only in terms of location but as in “where are prices headed?”  While acknowledging that mortgage rates are expected to rise moderately this year and that prices will probably rise somewhat as well, Steve believes that other factors like location deserve to be weighted more, and neither of these variables changes how much you can afford to pay for a home. Terry agrees, adding that spending less than you can afford is often a smart play, especially if that means owning a home that will also be more affordable for other buyers in the event that you decide to sell it.

Another key element in determining the criteria of your house search is how long you expect to live in the home. For people getting serious about a home purchase, that should ideally be between 5 and 10 years.  Five years is typically the “break-even” point in a normal market where you can sell without losing much capital. If you expect to move again in less than 10 years, you should reconsider buying a home and seek out objective professional advice. Steve notes that this is similar to the advice he’d give to someone about to make a significant investment in the stock market: If your timeline is less that 10 years, the risk you’re taking on will invariably be much higher.

Condo Association “Sleepover” Rules

Steve wraps up today’s segment with another letter sent to the Sun Sentinel’s Gary Singer, this time about a condo owner whose housing association has asked her to fill out a tenant application for her boyfriend who frequently overnights. The writer feels like it’s “juvenile” for the HOA to ask this of her for her boyfriend’s sleepovers. Terry says the only real resolution can be had by reading the HOA’s governing documents.  If the rules are spelled out and not in her favor, the best resolution would be to get the boyfriend to pay the tenant fee. If he refuses, find a new boyfriend!

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

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Steve Pomeranz: This is the time for real estate roundup. It’s the time every single week we get together with noted real estate agent, Terry Story. Terry is a 28-year veteran with Coldwell Banker located in sunny Boca Raton, Florida. A little bit chilly, little bit windy today but sunny nonetheless.

Terry Story: I have a scarf on.

Steve Pomeranz: Don’t rub it in, okay? Welcome back to the show, Terry.

Terry Story: Thanks for having me, Steve.

Steve Pomeranz: I know stock prices are rising. I mean, that’s my business and I’m sitting down with people every day and got good news for them. I know that home prices are rising too, tell us about that.

Terry Story: Yeah, well, we just got the reports that the best quarterly sales pace of the year was the fourth quarter. Home supplies are at record lows, which, basically, that’s what’s causing the appreciation to speed up slightly towards the end of the year. When you have low levels of supply that you’re going to have an increase in prices. Just basic supply and demand.

Steve Pomeranz: Mm-hmm (affirmative).

Terry Story: It’s not at the same pace that we have experienced in previous years or quarters. It’s still definitely rising, but not at a rapid pace that we had consistently seen. It’s an indication that we are at the top of the market, a market, some kind of market.

Steve Pomeranz: Yeah.

Terry Story: Because what I’m experienced in seeing firsthand, Steve, is a little bit of resistance on the buyer’s part. Even though there’s low levels of inventory, they’re a little more cautious. It’s almost like there’s an interesting phenomenon going on. You had mentioned it earlier. You know, the stock market’s really high. Is it they’re all afraid, that everything is so high is it all going to come tumbling down?

Steve Pomeranz: Yeah, that’s a-

Terry Story: I don’t know if they’ve got that in the back of their minds-

Steve Pomeranz: Yeah.

Terry Story: Whether that’s going to happen, or could happen, I don’t know.

Steve Pomeranz: Well, you know, first of all, we all remember what happened in ’05 and ’06. To those people who bought houses at those high prices and leveraged them very highly, and then there was a big decline in the price of the homes. They suffered for a really long period of time. Prices have gotten back to that level. Now, of course, the economy has grown. It’s not the same, and the banks are in much better shape. The chances of having some kind of big debacle like we saw in ’06, I personally believe is very low.

Terry Story: Right.

Steve Pomeranz: But this natural tendency or resistance to high prices, I think that’s very healthy because that’s kind of the nature of markets. They should get to a certain point where buyers maybe go, “You know what? I’m uncomfortable there.” Then I think with what’s going on in the political spectrum, everybody seems to be very, very concerned about what the future is.

Terry Story: That’s right. There’s just so much going on. I see it in all price ranges, Steve, except at the real low level.

Those things are selling like crazy. But you go above the entry level homes, I see it all across the board. There’s just a little, being a little cautious and conservative.

Steve Pomeranz: Okay. Changing gears here. Three questions to ask if you want to buy your dream home. If you’re debating purchasing a home right now, you’re probably getting a lot of advice. Family and friends, do they have your best interests at heart or are they fully aware of your needs? Here’s three questions to ask yourself to help determine if now is a good time for you to buy in today’s market. Go ahead.

Terry Story: Sure. The first question is always the why. Why is it that you want to buy a house? Forget the financial. So many people say, “Oh it’s a good investment.” Forget that side for a moment.

Steve Pomeranz: Yeah.

Terry Story: Why is it? Is it because you’re looking for a great place to raise children? Are you looking a place for your family to feel safe? You’re looking for more space? Or you want to be able to control that space versus renting, where you don’t have control over your space? Those would be answering the why question. From there, where. Where are the values heading? Well, if you look right now, we could say that the values are still climbing. We’ve just experienced our 58th consecutive month year over your gains. All of that’s good. The forecast is still positive. I’d say the home value direction is still upward. Maybe not as steep as it did.

Steve Pomeranz: Mm-hmm (affirmative).

Terry Story: Where’s the mortgage rates headed? That’s the cost factor in all of this.

Steve Pomeranz: Yeah.

Terry Story: Well, long-term, we know that they are going to adjust. They’ve already gone up a little bit. Projections are they’re going to go up a little bit more a couple times throughout the year. All of that does play into the interest rates in the cost and what’s going on.

Steve Pomeranz: You know, I’m a little surprised at those answers because it seems to me if you’re talking about a dream home, I could see you wanting to consider the fact of location. That’s very important. Maybe the school district, that’s very important especially if one of your concerns or your considerations is to raise a family and so on. Where home values are headed, I mean, you should buy a home that’s affordable that you can plan to be in for a long period of time.

Terry Story: Absolutely. [crosstalk 00:05:22]

Steve Pomeranz: We’re not talking about-

Terry Story: That takes into account, you know, when you measure those things, maybe you don’t want to purchase a house as expensive as you can afford. You want to get something a little less or in the median price range where there’s a greater chance of your home selling if there’s a change in the market.

Steve Pomeranz: Yeah, but also the fact that you’re probably going to be in there five to ten years or something like that.

Terry Story: Right, and you’re going to ride out most of-

Steve Pomeranz: You’re going to ride out most of it.

Terry Story: That’s a huge factor. In my mind when I ask people, “Why do you want to buy a house? Dah dah dah dah dah,” I’ll say to them, “When you purchase a home, plan on being on that home five years” because, on average, that’s what the break-even is. It’s about five years.

Steve Pomeranz: Exactly. That’s a good point about buying a dream home. If you plan to move or you’re thinking maybe transferring your business and all that, you know, maybe you really shouldn’t buy a home. It’s the same thing when people ask me, you know, they want to get into the stock market. My first question is, “Well, what time frame are we talking about?” Because I don’t know what the market’s going to be doing at six months from now or a year from now, or even two years from now. But I kind of know where it’s going to be ten years from now.

Terry Story: Right.

Steve Pomeranz: If that’s your time frame, the answer is yes. These are the prices, they’re high today, they may go down in the near future, whatever, nobody knows. But I can tell you that ten years from now, you know, there’s a high probability that they’re going to be higher. I think it’s the same for a house.

Terry Story: Yeah, I agree.

Steve Pomeranz: Okay. I want to change gears here real quick. We’re running out of time. Here’s a question that was printed by the Sun Sentinel correspondent, Gary Singer, I love it. “I have been renting a condominium for the past several years. The man I have been dating stays over frequently. A board member approached me and told me I need to fill out a tenant application and pay a fee for my boyfriend. The condo rules state that guests may not stay more than fourteen days in any six-month period. My landlord is unaware of this. It also seems so juvenile to ask if I can have a sleepover. Do I need to pay the fee?”

Terry Story: Yeah, this is loaded. So many wrongs in this.

Steve Pomeranz: Answer quickly, because we’re running out of time.

Terry Story: Okay. Look to the government documents. If that’s the rule, you got to pay the fee. Ask the boyfriend to pay the $100 fee-

Steve Pomeranz: That’s it.

Terry Story: Or dump the boyfriend.

Steve Pomeranz: Or get a boyfriend every two weeks.

Terry Story: Get a new boyfriend every six months.

Steve Pomeranz: Thanks, Terry. My guest as always is Terry Story. A 28-year veteran with Coldwell Banker located in Boca Raton, Florida. She can be found at TerryStory.com. Thanks, Terry!

Terry Story: Thanks for having me, Steve.