Wednesday, February 1, 2012

The Time To Buy Is Now

This is taken from John Talbot the author of The Coming Crash in the Housing Market and Sell Now! The End of the Housing Bubble, both written before 2005.  He is currently talking about the reasons that make right now the best time to buy, and here are excerpts from his article;

Home prices are off anywhere from 10% to more than 60% in cities across the country. There is no reason to believe that prices were "fair" during the bubble as we have seen they were largely caused by loose and aggressive lending by banks and non-banks And by my calculations, in most cities across the country, real prices adjusted for inflation have just about come into line with where prices were in 1997

Homes in many cities across the country are now selling for as little as $60 to $70 a square foot. Depending on the quality of construction and the underlying land value, this represents a 50% to 65% discount to the costs you would incur if you tried to build a similar home today in these cities.

During the peak years of the housing bubble, entire cities like San Diego were seeing their homes priced on average at 11 times the area's median family income. Now, homes in many cities are changing hands at three to four times average family incomes.

We still talk about home prices in dollar terms, which is silly because the dollar has lost 98% of its purchasing power relative to a more stable asset like gold over the last fifty years. If instead of pricing houses in dollars, we look and see what a home would cost in ounces of gold, we see that houses today are a real bargain.

You might argue that this is because gold is priced highly today. I would argue that gold's purchasing power has changed very little over time, it is the dollar that is depreciating and thus giving the appearance that the price of gold is rising. Actually, gold is quite stable relative to other assets and commodities and it is the dollar that is highly volatile and declining in value due to the US funding its deficits by printing dollars.

John R. Talbott, previously a Goldman Sachs investment banker, is a best selling author and economic consultant to families. You can read more about his books, the accuracy of his predictions and his family consulting activities at

I will augment this article by relating that of the last 4 contracts I have written, 3 have had multiple offers, and while my clients all bid over the asking price, we were not the highest bidder on any of the 3 contracts.  Hardly a coincidence.

While stories in the Charlotte Observer and other media outlets tell the tale of the price of homes sold is still dropping, they do not report that the number of non distressed properties on the market is lower than it has been for at least 10 years.  It stands to reason that if the market is made up of low end houses that the market will be reflective of those lower prices. 

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