Homing In on Time to Buy

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When I moved to Los Angeles in late 2005, my wife and I decided to postpone buying a house. That was a smart decision, but we didn’t make it because we are astute market timers; back then, pretty much everyone and their financial advisers were saying that the then-peaking house prices were headed for a correction and maybe a big one. So we heeded the prevailing counsel. We rented a cozy little house and settled in to wait out the housing bust.

A personal aside: Renting was unsettling at first. I’d been a homeowner since I was 23 years old, and I long ago grew accustomed to spending my weekends painting or planting, hammering or hanging something. Just how does an accidental renter spend his weekends, I wondered? But I quickly fell in love with the freedom that comes from renting. (“Honey, can you tell the landlord he needs to fix the leaky faucet? I’m busy reading this magazine.”)

Flash-forward to today, 4½ years later, and we’re still waiting. What’s more, we think we’ll wait a little longer. While home prices in Los Angeles have plummeted, deep down I feel like something’s still not right.

I know what some of you are thinking: Dawdling may not be a smart decision.

In fact, I’ve already missed out on being the early bird. Home prices hereabouts have been firming up for more than a year. As you can see in our monthly report on the local house and condo markets that begins on page 26, the number of homes in Los Angeles County that sold in May was up 13 percent from the same month last year. Prices were up 15 percent.

And some of you are probably thinking that if I sprang to action I could still get a good deal. Many mortgage rates last week were below 5 percent and some adjustable rate mortgages, incredibly, began with the number “3.” When will we see those rates again?

As if I needed any more encouragement, the economy appears to be getting back on its feet, which should boost home prices going forward. A survey released a couple of weeks ago by MacroMarkets LLC said 92 economists on average expect home prices to increase more than 12 percent by the end of 2014.

I can almost hear some of you screaming: “So buy, already!”

Yet I hesitate. Maybe it’s because I wonder if the housing market has been buoyed artificially by that federal program that gave an $8,000 tax credit to first-time home buyers and $6,500 to repeat buyers. Since that program expired at the end of April, mortgage applications have plunged 40 percent. How long will that linger?

Throw in the slow pace of job creation and the still-full pipeline that’ll be spewing out foreclosed homes for years, and I wonder a little more about the prospects of the housing market. Oh, and there’s the likelihood of higher taxes, thanks to bankrupt governments at our local, state and federal levels. That can’t be good.

When I get circulars from real estate agents, I still see furious price chopping. I still see desperation in the eyes of sellers. And prices still seem, well, too high.

As I said, I’m not a market timer. Trying to be one is foolish. I tell myself that maybe we should just buy. But when I think about doing that, I get a little queasy. I can’t tell you why, exactly. Something inside is telling me to wait. Not now. Hold off. Just a little longer.

Then again, maybe it’s not home prices that are making me balk. Maybe that “something” inside me is mere laziness. Maybe deep down I’ve grown to love the renter’s freedom from weekend-killing home-improvement projects. Now that I think about it, I’ve got a pretty tall stack of magazines that need to be read.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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