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HomeReport
Real Estate & Finance News That Affects Your Home July 2008 - Page 1
 MARKET BOTTOM?
Why Smart Home Buyers Are No Longer Waiting To Buy
In today's new real estate market the time for hesitation is past. Now is the time for action. To take advantage of the new market, the reality is clear—don't wait:
- If you are ready to move to a home where you would rather live;
- If you can afford a conventional fixed-rate loan;
- If you plan to live there or own it for several years; now is the right time to move or buy a first home, second home or rental.
Waiting rarely pays off for many reasons. In this issue of our newsletter, we'll share with you what we've learned from experience.
Recent Sales
Homes are selling in our area. Yes, there is more inventory. Yes, time on market is longer. Yes, loan requirements are tighter. Yes, there are more short sales, bank-owned foreclosures and rental bargains that pull average prices lower. But look beyond national headlines. Our local housing market is not a “bust,” “collapse,” “meltdown,” or “crash” of zero sales. In reality, good properties—high-end, middle-market, even low-end—are selling (ask us for the latest area sales figures), especially with more sellers being realistic about their asking prices to compete. Waiting simply misses out on these good values.
New Buyers
Demand is increasing because today's market has attracted “new buyers,” such as pent-up “should-have-moved” locals who put off moving in recent years; boomers with equity looking for second homes; international buyers who see properties priced to sell and enjoy favorable exchange rates; first-timers with parent and grandparent support; resized new construction that's smaller, lower-priced; long-term investors with a goal to “buy low, sell high” years from now. These buyers are buying now.
Interest Rates
Even though rates are around historic lows, demand is what makes home prices stabilize, demand makes sellers less willing to negotiate and demand pushes interest rates higher. Higher interest rates eliminate savings from lower prices. For example, if you bought a $218,900 home 12 months ago at 5.5%, your monthly payment (principal and interest) would be $994 (assume 20% down payment, 30-year fixed-rate loan). If you bought the same home today at $197,010 (assume a 10% price drop) at 6% your monthly payment would be $994. In addition, temporary increases of jumbo loan limits to $729,750 (highest-price markets) expire December 31, 2008. By waiting, any savings from a lower price may be offset by higher financing costs.
Bottoms Up?
No one can pinpoint the “bottom of the market”—except historians with hindsight. Why? Housing markets don't “bottom.” Instead, after a period of price declines, leading indicators gradually correct: Transaction volumes increase, days on market decline, prices become steady, inventory sells off, the range between list price and sales price shrinks, builders withdraw incentives as land prices and material costs rise. Indicators reflect the rebound as the housing market adjusts—but the best properties are already gone.
Simply put, the best time to buy is now, as long as you're buying the right home, at the right price and on the right terms. Call us.
5 Questions Every Savvy Home Buyer Should Be Asking Now
- Is our rent equal to a loan payment? If you can afford to buy, it can give you one bonus that renting cannot—the lucrative tax breaks that come with owning a home:
- Deductions for payments of mortgage interest, loan discount points and real estate taxes.
- Home-office deductions for qualified owners.
- Deductions for expenses if you rent out your property.
- Home-sale capital-gains exclusion—profits up to $500,000 tax-free!
- Are prices in our preferred area steady? In many areas of the country—even in areas with high foreclosure rates—there are neighborhoods where homes are holding their value or increasing in value while price decline is slowing.
- Will our equity go further where homes cost less? By moving to a place where homes are less expensive—and general living costs are lower—your money will go a lot further a lot longer.
- Will we live in this home for several years? Financial planners often advise buyers to think of real estate as you would any other large investment: The longer you hold your home before selling, the higher the probability you'll ride out any downturn and come out ahead on price when you decide to sell.
- Is this the perfect home for us? The schools are fantastic. The proximity to your office, gym, favorite stores can't be beat. You love the area and the home, and you won't find another one like it. In a better market, you would most likely have much more competition for that home.
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