By Johnny Brooks
The latest housing market headlines are either encouraging or bleak, depending on your community. Foreclosures are steady, home prices are down and new-home-sales are stagnant. With so much bad news, many buyers are sitting on the sidelines, afraid to make a move. It's hard to believe, but we are now five years removed from the peak of the housing bubble. Many experts and economist say waiting for the bottom may not be the smartest strategy.
For one thing, there's no agreement on when or if the U.S. real estate market has officially touched bottom. Real estate is local and therefore what constitutes the bottom for the country is meaningless for those looking to buy or sell homes in their own neighborhoods. Prices in some markets have not yet hit their lowest point, but they aren't that far off. In other areas,only the pace of total sales has been affected, prices have held firm or actually increased.
Just like the weather, there are large local variations in home prices. In the National Association of Realtors annual report on Metro home prices, almost half the markets posted price increases. In the most desirable neighborhoods like Davis,California, my area of expertise, there could be a price to pay by waiting. More than a few homes this year had multiple offers. In that scenario, this erases the potential savings you thought you achieved by waiting.
For some people, the value of the local public schools will play an important role in their buying decision. A well-designed house in an established area,with a good public-school district will hold it's value. These communities don't get hurt as much as the whole market and they recover faster. The other factor buyers need to consider is how much longer interest rates will be at these historical lows. Sometimes home buyers get so fixated on getting the lowest possible price, that they forget just how little difference an extra $10,000 in the home price can mean to their monthly mortgage payment.
Assuming a buyer pays $310,000 rather than $300,000, on a 4 percent thirty year loan, you would pay an additional $55 more a month. Over the long haul, buyers should be more concerned with an interest rate increase than if property values drop another two or three percent. Here are a few reasons why buyers should consider this an optimal time to pursue a home. Do your homework and verify how stable prices are in the neighborhood you are interested in, specifically prices within a mile radius of the subject property. Be rational and smart, if you plan on buying and then selling that home in less than five years, I would suggest renting instead. If you can stick it out for at least five years, economist say you'll probably ride out any downturn and come out ahead in price.
If your rents rivals a mortgage payments. This is fairly obvious, why pay someone else's mortgage off. Put that hard-earned monies toward your own mortgage. Every individual buyer will have to make that critical decision on the right time to buy a home based on many factors.
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