Save $300,000 on Your Next Home

After writing my last post I was looking around and found an article that referenced a recent survey conducted for FICO by the Professional Risk Managers’ International Association (PRMIA).  In that survey, 49 percent of respondents said that they did not expect home prices to rise to 2007 levels before 2020; 21 percent of respondents thought the recovery would be more rapid.  In January 2007, the Case-Shiller home price index for Las Vegas was at 231.88.  In November 2011, it was at 90.43.  So let’s assume that the more pessimistic view of the PRMIA survey respondents is correct, and it takes until 2020 for the home prices to regain their 2007 levels.  Using that assumption, if you bought a house in Clark County today for $200,000 that same house 8 years from now would be selling for just over $500,000.  The conclusion that can be drawn from this is that even the most pessimistic of risk managers, whose job is to be pessimistic, think that home prices will rise 12% per year over the next 8 years.

The question for you is do you want to buy a house now for $200,000 or wait for the recovery to be completed and pay over $500,000 for it?  There will be many investors who buy $200,000 houses now who will be more than happy to sell them to you for $500,000 in eight years and pocket the $300,000 difference. In an interview last week with Becky Quick on CNBC, Warren Buffet told her that “single-family homes are cheap now” and that he’d buy up “a couple hundred thousand” if it were practical to do so.  It’s a buyer’s market!  Let me find something for you to buy while homes are still cheap.  They won’t be cheap forever.