In mid-February I put a deposit down on a house with some earnest money. The house is new construction and will be available in early May (approximately).
Of course, I did this before all the Covid stuff tanked the markets and completely changed market outlooks (real estate and otherwise). My 401k has taken a massive hit - I was going to borrow from it for the down payment - and I can't help but think that RE prices will drop soon. I mean, how can that not happen with all the changes happening right now? I think if you take current RE prices and snapshot them, in a year you'll find lots of relative bargains.
While I realize that every real estate market is different and all that, I think WSO has some of the smartest people of any discussion board and I'd like to get feedback. For the purposes of this post, let's say the earnest money is an amount that would pale in comparison to most RE market drops (less than $5k).
Do you continue with the purchase? Or do you sacrifice the earnest money and walk away?
It depends. interest rates have dropped which should still help to drive demand. Anyone in the airline industry wont be buying a house for the foreseeable future. If we have any cascade affects to other industries, this will reduce demand. Supply will still be getting churned out because the projects are already halfway done.
If I were in your shoes, I would start talking to other builders and see how desperate they seem, if you can find something you like before may, I bet you could potentially negotiate well between now and then as the frenzy grows. then forgo your earnest money. I would say any discount will be on the house under construction today that are not under contract, new starts will be delayed. the next couple months will be the over supply.
Hire a home inspector and let them know you’re trying to get out of the deal. Most contacts allow for killing the deal with no penalty to you if the inspector finds anything….so let him know to find something. If the builder fights you tooth and nail then you have confirmed that whatever your earnest money loss is will pale compared to a market loss.
I’m in the residential/rental market and there’s plenty of places where folks are going to take six figure hits as mortage rates go up and conditions overall soften. They just don’t know it yet or they’re shutting themselves
There should never be a time NOT to buy real estate.
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