Is it really a buyer's market?

My answer here is a resounding "NO."  Not in my experience, anyway.  Talking heads have called today's market a "buyer's market" because interest rates are at historic lows, and the prices of homes have dropped. 

Side notes:
 - Interest rates were at 4.5% in Nov 2010.  As of today, they are back up to 5%.  Still low, but not "the lowest in history" any longer...and rising. 

 - Values of homes are dropping along with their prices.  Consider the neighborhood you're buying in, or considering buying in.  Will the value of that neighborhood recover and the value of the house you're looking at increase?  In 2006, I was looking at buying when the market was booming (before the bubble burst), and my dad gave me this advice: "Today's real eastate market will not be tomorrow's real estate market."  It was great advice, and thank god I didn't buy...but that advice still holds true for today's market.  You may buy a home that appears to have "instant equity" because it has appraised for more than what you're paying for it...but things are still evolving and "Settling" with the real estate market, and with the economy.  Invest in the future of the market, not in today's market.  And, in the meantime, don't assume tomorrow's market will be better.

Back to the original question of the "buyer's market."  It also depends on what kind of buyer you are.  We lost a house to a cash buyer who paid about $40k more than what the house would have appraised for.  What do you care what the hosue is really worth when you have $190k in cash to sink into a house?  Did that buyer care that the house needed work?  That the window in the master bedroom had a leak and there was water damage to the wall?  My guess is "obviously not."  If you're a cash-buyer, and have more money in the bank than the price of the home to make repairs, I'd say go for it!  Good for you.  (A word of caution at the end of this post though...keep reading.)

Even if you're financing...Can you afford to pay all closing costs?  We've also encountered sellers who would not pay any closing costs because they can't afford it, and they need the full asking price so they don't lose money.  This is a situation where they would normally be short-selling, but are hoping they can find a buyer to pay full price (or above) and all closing costs so they dont' have to short sale.  Generally speaking, it's considered a courtesy that the sellers assist the buyers with closing costs...but if you can afford all that...go for it! 

This "buyer's market" also calls for patient buyers.  I know what you're saying "I can be patient."  And, to that I say "you have NO idea what patience is until you have tried to buy in today's real estate market!"  It will drive you mad.  Short sale or not, but especially with short sales.  Expect to play a game called "hurry up and wait" and expect to play it for awhile, and often.  See my very first post to this blog for more info on that.  Traditional sales require less patience, but you should expect to have to be patient because there may be multiple offers on a traditional sale, because they are few, and far between so everyone (including your realtor) wants that situation if they can find it.

In summary, this is really a buyer's market for those people who have lots of cash, an abundance of savings, and/or an insane amount of patience.  But remember, don't wrap up all your savings into the purchase of the house!  Keep a nest-egg for when Murphy knocks on your new door...in the form of broken A/C, broken fridge, hot water heater, roof leak, and other misc unexpected home repairs or upgrades that inspection didn't catch.  If it can happen, it probably will!

FAQ: Why don't we just look for another house?

The answer here is simple: We have looked for other houses, and we continue to do so. 

I scour the MLS everyday looking for new listings that suit our needs, and haven't found anything that strikes me.

We have submitted offers on two houses since offering on the short sale.  One of those homes was a short sale and the seller didn't accept our offer (now that home is re-listed for far less than what we offerd for it, ironically, with another one of those "Approval letters" on hand) and another home with sellers who were not realistic about today's market...the second time we encountered that.  It seems sellers are in denial that their asking prices are too high, because their homes will not appraise for what they need/want out of the sale of the home.

The fact is, we as buyers can be picky in a market like this one.  (more on this "buyer's market" in the next post)  There are more houses than there are buyers.  And, until we find a house that is as good or better than this one, we want this one.  Or, we will walk away from buying all together...because we're not willing to settle, and you shouldn't be willing to do that, either.  Make a list of what you want in a home, decide what onthat list is a "must-have" and what on the list is "nice-to-have."  Then, don't budge.  Realtors will try to tell you that house isn't out there, or that it's located in a different county, etc. 

It's a lot like dating.  Stick to your guns. Don't lower your standards.  The difference between dating and buying a house: We're talking about an investment of hundreds of thousands of dollars...don't settle for anything less than exactly (or nearly exactly) what you want.