Is a buyers market really a good time to buy? (Getty Images)
In a buyers market, there are more homes for sale than there are people shopping for homes. Hypothetically, this means that buyers have the upper hand, since there are plenty of other choices out there. But is it a good time to buy a home just because it’s a buyers market? Should you rush to buy right now?
It’s a Buyers Market, but Is It a Good Time to Buy a Home?
Does a buyers market always mean it’s a good time to buy? In today’s climate, one could argue that the current glut of housing inventory — StreetEasy’s Q3 2019 market report indicates that NYC sales inventory is close to an all-time high — makes it an outstanding opportunity for buyers to scoop up property.
“The inventory gives buyers a wide selection,” say Julie Newdow and Mark Landisman, senior global real estate advisers at Compass. “It lets them get all the attributes they’re looking for while maximizing their ability to negotiate.”
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And if you’re interested in new construction, you might be able to snag a great deal in a buyer’s market, says Debra Shultz, senior mortgage banker at Citizens Bank in Manhattan. “With lots of new construction on the market and sponsors motivated to move inventory, some might offer to cover the NY State & City transfer tax, and sometimes even the NY State mansion tax, as an incentive to buy in their building,” she says.
Will Prices Continue to Drop?
The high inventory is promising for buyers, but whether or not now is the right time to buy also depends on whether prices have stabilized or are still falling. With the economy and politics in an unsettled state, some experts believe prices are going to drop further. Grant Long, StreetEasy’s senior economist, is one of them: “We can expect to see prices continue to fall through the course of 2020,” he predicts.
Newdow and Landisman agree — depending on the apartment. They’ve seen co-ops on the Upper West Side under the $999,000 price point not only have their prices firm up but sell for over asking price, with multiple bids. On the other hand, they say, Upper East Side homes at prices up to $4 million are languishing on the market for more than 150 days, despite being discounted 10% to 15% from their values two years ago. And new developments downtown are facing similar issues: These apartments will require further reductions to sell, they say.
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How to Know If You’re Ready to Buy
Regardless of what type of market you’re facing, there are many things to consider before you commit to a purchase. Ask yourself these key questions before deciding to buy, says Shultz. And if you don’t like the answers, hold off — buyers market or not.
- Do you have enough money for a down payment?
For a condo, assume 10% to 20% for a lower price point, and up to 50% down for a higher price point in a swanky neighborhood, Shultz says.
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- Are your employment and salary stable?
“If we move into a recession, could your employment and/or salary be affected?” she says. “Make sure both are stable and high enough to comfortably afford your mortgage payment for years to come.”
- Is your credit where you want it to be to obtain a favorable interest rate?
Ideally, she says, you don’t want to owe more than 30% of your maximum credit limit.
- Will you have a cushion?
A good rule of thumb is to have six to 12 months of mortgage payments and carrying charges in liquid reserves, Shultz recommends. “Rather than throwing down every penny you have, keep a little cash in the bank for a rainy day, just in case.”
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