Should I Buy That Daytona
Beach Home Now or Wait?

June 21, 2008

It's very easy to find homes for sale with a tremendous number of homes and condos of all types and varieties on the market. The Daytona Beach real estate market mirrors many markets around the country with a definite buyer's market.

Prices have been falling, but we've seen a slight increase this month in the median sales prices for real estate in Ormond Beach and Daytona Beach. The burning question remains for many people -- Should we buy now or later?

First, let's be very clear. Unless you are an investor, buying a home is a personal decision, and, being personal, it's emotional. But, because of the amount of money involved in purchasing a home, it's also one of the most important financial decisions you will make.

That's the way we should look at the home buying decision now or at any time - as a two-part combination of one part personal and emotional, and, one part important financial decision.

It's All About The Risk of Buying a Home

The personal and emotion part of the equation is really up to you. The issues facing us now in the middle of 2008, are primarily around the financial risk associated with buying a house or condo. Those risks, based on our analysis and experience are:

1. The value of the purchased home will go down
2. Mortgage rates will increase

Daytona Beach Home Value Risk

There is still a danger of further price drops in many market segments. We suspect that prices for houses in the under $200,000 have largely stabilized and in that price range, buyers and sellers are more closely matched on value than in other prices ranges. However, we need to remember that some sellers who have chased the market down are still not competitively pricing their properties. So, in every price range there are well priced homes and condos that are over-priced. Daytona Beach condos and Ormond Beach condos have been lagging behind recently in sales, so we expect further price adjustment, but not nearly as much as we've seen since the real estate bubble popped.

Your financial strategy should be one of careful consideration depending upon your circumstances. If you are certain that you will keep the house or condo for 5 to 7 years or longer, there is a good chance that you will see appreciation in that property. If there is a possibility that you would need to move before then, I recommend being very careful in assuring that you get a very good price, or wait. With the cost of buying and selling, and no certainty of short-term price appreciation, you may be better waiting and renting an apartment, house or condo in the short-term.

Mortgage Rate Risk

If you are paying cash, then the second factor is not important to you and you are in a much better position to wait until you are absolutely certain that prices have bottomed. If you will be financing your home purchase, then both risks are important to you.

We've seen mortgage rates jump by 1/2% for a 30 year conventional mortgage in the past few weeks. On a $200,000 mortgage, that's an increase of about $58 per month. Basically, at 80% financing, for the same payments, you would need to buy at $12,500 less.  On a $250,000 home purchase, that's the same as a 5% price drop. There's a more detailed explanation of mortgage rate risks at Mortgage Rate Increases Headline Daytona Beach Real Estate News

With so many Florida homes for sale, it is important to remember that Daytona Beach Condos and homes prices are lower than nearly all coastal areas.  There are good values and with foreclosures and short sales, you may be able to get a great deal if you have the patience to deal with banks that often slow to act. I've had success helping clients with these purchases and they were able to save significant money.

Watch interest rates and prices carefully. We publish weekly, monthly, and long-term reports and analysis at Daytona Beach Real Estate Market Reports.

Now or Later?

So, should you buy that Daytona Beach Home now or later. If you are committed to buying, and will keep the property for more than five years, I suggest sooner rather than later. If you will be financing the property, I am more worried about mortgage rates than home prices for the next few years. If you wait, you will actually get less home for the money. If you are a cash buyer, you should focus on getting the best possible price and you have the time to wait on short sales and foreclosure opportunities.

Be sure to visit my Daytona Beach and Ormond Beach real estate website, or my Daytona Beach real estate blog for more information.