Should I Buy a House Now?
Buying a Home in Today's Real Estate Market
With the real estate market in a downturn, many people are wondering, is it the right time to buy a house? Information is provided to help you make the right decision.
It seems wherever you turn these days, there are financial experts providing advice about what is going to happen to the real estate market. What is interesting is the advice tends to differ depending upon with whom you are having the conversation or what newspaper or magazine article you are reading. One expert will predict that during the next few years the real estate market will be reeling with little hope to recover during the next decade. Other experts expect the market will recover within six months to one year. Who do you believe?
What most people do understand is that the real estate market is in a downturn, due to the following:
- the sub-prime mortgage meltdown - which involves high default rates on the sub-prime and other adjustable rate mortgages
- the negative amortization teaser loans resetting - which is causing more homes to be available on the market
- home-builders inflating the value of homes, and
- homebuyers using their homes as virtual ATMs.
With some experts screaming “crisis”, how do you know if it is the right time to buy a house in this market? Here is some information to help you make the right decision.
It Is a Buyer’s Market
Many experts believe it has become a buyer’s market, especially for those who are willing to take the time and research recent foreclosures and short sales. With interest rates on 3 and 5-year arms adjusting as well as those who used 100% financing, many people are beginning to lose their homes and many more will in the future. This means, in short, that numerous homes will be available at drastically reduced prices.
Why Buy a Home in Today’s Market?
Cindy De Garceau, an experienced realtor at Shorewood Realtors in Hermosa Beach, Ca, stated there a few good reasons to buy a home in today's market. “In today's buyer's market we are seeing a spike in housing inventory whether it is a straight sale, foreclosure sale, or short sale. These sellers and/or lenders are competing against one another for the qualified pool of home buyers,” said De Garceau in a March 2008 interview. “This can result in negotiating a better price for the home and seller concessions, such as credits for buyers closing costs.”
De Garceau also discussed at length the importance of taking the opportunity to purchase a home while there are historically low interest rates. With lower interest rates, homebuyers have the opportunity to pay less interest on their next home purchase, which can be a significant reduction in cost.
De Garceau also believes that because the mortgage rates are near historic lows, this means they are more likely to rise in the future. As housing prices and sales continue to decline there is the possibility of a spike in interest rates. For those waiting to buy a home, they may find themselves with a higher interest rate, which may offset the bottom line in terms of cost for the home and costs of the loan.
Who Should Buy a Home in Today’s Real Estate Market?
The people in the best position to buy a home are those who have done their homework about the housing market and the area they choose to live in, those who have money in the bank, and those who have excellent credit.
Getting the Best Deal
De Garceau believes that potential buyers should take into consideration that this is a different market than in the past. It is unrealistic to believe the value of your home will increase tenfold in a few years. “A better approach and expectation in today's market is to look at real estate for what it really is and that is a long-term investment,” said De Garceau in the 2008 interview.
Other Factors to Consider When Buying a Home in Today’s Market
- Take your time and find a home that fits your needs. Compare prices of other homes in the neighborhood, evaluate the amenities available in the area, and assess the neighborhood, the commute and other features offered.
- Get pre-qualified, have excellent credit in check, close to 700, and cash available in the bank. Be prepared for the short sales and foreclosures that will be available.
- Find a local Realtor with experience and knowledge of how to negotiate the best deal for you and your family.
- Don’t offer the asking price. Feel free to lowball and see what kind of deal you can get.
- When you do buy a home, consider a conventional fixed rate mortgage.
