What time is the best time to buy a house (if you still have buying power) ?

From studying history, I find that the best time is not pre-recession (Jan 2008). It may not be in the middle of recession, end of 2008 or end of 2009 (we don’t know how long this recession will last). The best time is when recession is passed (at least officially), when unemployment reached its highest level, that would be sometimes in 2010. I know you don’t have such patience to tame you desire for that long, but let’s throw our emotions aside, that’s the best time to pull the ‘buy’ trigger.

Let’s use last cycle as example: Recession started in Jan, 1991 and ended in Jan. 1992 (officially), but unemployment reached its peak at end of 1993. That was when the best bargain could have had during that time. Although, it took another 5 years, until 1998, before we saw any visible price appreciation. Therefore, if you respect history, then 2010 will look very much like 1993.

Signs of Recession are showing stronger and stronger

Unemployment rate has bottomed out in mid 2007 at 4.2% from a peak at 6.2% reached in 2003 and is now edging up to 4.5% at early 2008. After studying past records since 1960, when we observe this kind of trend change, 9 out of 10 chance is that we will see a new recession arrive in next 3-12 month. That’s where we are. Recession usually lasts 12-24 months. During that period, history has taught us that unemployment rate will go up very fast. In 2003, it reached 6.2%. In 1992, it reached 7.9%. In 1983, it reached 10.4%! How high will the rate rise during the next 12-24 month? We know that 6.2% is only a moderate recession, so it could rise beyond 6.2%. History also told us that although official period for recession is 12-24 month, unemployment will peak at about 12 month AFTER the end of a recession. Therefore, it’s highly probable that middle class people will feel pinched during the next 3 years.

That’s why I am very confident that home price will probably bottom out in 2010. The current blows to housing are 1) change of consumers confidence for housing as an investment 2) Hardship to get loans to buy houses for those who really can’t wait. During the next 3 years, the third blow will arrive: Job losses and fear of job losses will deal the most serious blow the housing market.

Investors, be patient, very patient.