As median home prices dropped to the lowest level in four years, many economists appeared pleased that the housing market is beginning to chip away at the inventory glut. The U.S. Commerce Department said Monday that sales of new single-family homes rose by 2.7 percent in September to a seasonally adjusted annual rate of 464,000 units.
The new data comes on the heels of a National Association of Realtors (NAR) report released Friday that said existing-home sales also increased in September, as buyers responded to greater affordability. Existing sales - which consist of single-family homes, townhouses, condominiums and co-ops - rose 5.5 percent to a seasonally adjusted annual rate of 5.18 million units in September. That's up from a level of 4.91 million units in August and 1.4 percent higher than the 5.11 million units sold in September 2007, according to the report.
Affordability drawing buyers
While the credit markets have been gridlocked, and obtaining a home loan is not as easy as it was during the housing boom, affordability has never been greater for new buyers. The median price of a new home declined by 9.1 percent from a year ago to $218,400, its lowest level since September 2004, according to the Commerce Department.
The national median price for all types of existing homes was $191,600 in September, down 9.0 percent from a year ago, when the median was $210,500, NAR reported. Foreclosures or short sales currently make up 35 to 40 percent of transactions. NAR says these distressed sales are pulling the median price down, because many are being sold at discounted prices.
As a prospective home buyer, don't believe everything you read. Despite the barrage of negative housing news, obtaining a home loan is not as impossible as some news reports allege, but only if you have a solid credit rating and make decent money.
Over the weekend, I had dinner with some friends who recently made a deal on a preconstruction condo in downtown Chicago. My friends have been looking for over a year, but decided not to take the plunge until recently. Their waiting has paid off. Both of them have excellent credit scores and good jobs, so they were immediately approved for a conventional, 30-year fixed-rate mortgage. With home values down and fewer buyers in the market, they went in with the upper hand and were able to negotiate the asking price down by some $15,000. Not only that, they got all the condo's swanky upgrades included in the price. So when real estate agents tell you this is a buyer's market, they're not lying.
Sellers, be realistic
Many homeowners who want to sell their homes in today's down market are holding out. Others, who have no choice but to put their property on the block (especially if they're relocating for work), need to be realistic about their asking price.
Another friend of mind, who recently decided to move from the city into the suburbs, had to reduce the asking price for his 4-bed, 3-bath duplex from $850,000 to $750,000 (the result of several failed reductions in between). After the price reduction, he received three bids on the property. The duplex had been on the market for nearly six months without a single offer. Taking a $100,000 loss is not something most sellers want to do or will likely do. But in my friend's situation, he didn't want to get stuck paying two mortgages. And with today's shaky financial market, he was willing to take a major loss to get the property sold. My friend is a successful entrepreneur and is no novice at selling homes. He moonlights as a real estate investor and points out that people are naive if they think they can still rake in a 20-to-30 percent profit in today's market.
If the housing meltdown has taught us anything, it's the lesson that owning a home is a long-term investment. Buying a property today and trying to sell it within the next two years isn't going to net you the same profits it once did during the boom. I can't stress enough the importance of doing your homework before you buy. Get to know your area's community, schools and crime rate. Being patient and well-informed could mean the difference between a profit and a loss.
Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@homescape.com.
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