Today’s Market
Though families already in homes may be experiencing some turmoil thanks to the downturn in the housing market, first-time homebuyers and couples looking for starter homes (like me) may be able to take advantage of the market. My husband and I just bought a new home for a great price in a great location—an area we couldn’t even consider a couple of years ago. We had to wait in line for over 24-hours to get this great deal, but that was a small price to pay for a great investment.
If you are considering buying a new home in today’s (2008) market, here are a few tips from my own experience:
- Read up on the real estate market. You can find blogs in your area or set a Google Alert for “Bay Area Housing Market” or terms that pertain to your area. Jason and I have been renting in the Bay Area for sometime, with little hope of buying anytime soon. But we paid attention to the market anyway, read some great advice from local experts, and continually weighed the advantages and disadvantages of owning a home in this area. When the opportunity arose to buy our new home, we already knew the investment would be wise, how much we could afford to spend, and that the pricing we got was lower than anything we’d seen in months, if not years.
- Buy new. We discovered that many new home builders are having trouble selling all of the units they’ve built. Since they are in the business of building and selling homes, excess inventory prevents them completing the process and moving to the next property. To fix the disparity, they will offer incentives or be receptive to negotiations that could help you purchase a home. For example, in negotiating our deal, we got closing costs paid and great financing without any money down. You might not get what you ask for, but if it’s the difference between buying now and waiting, then it’s at least worth asking.
- Stay within your means. If you’re going to stretch yourself to get into a new home, now would be the time, but do so responsibly. Families currently experiencing difficulties making their mortgage are the ones who stretched to get into a home when prices were at an all-time high. Now that the market has dropped, they are upside down on the loan—meaning they owe more than the property is worth. Another reason for difficulties making payments is that they may have taken out an adjustable rate loan to ensure monthly minimum payments were manageable, hoping their income would grow before interest rates would increase. Now that interest rates have gone up, they’re unable to refinance into a lower, more affordable payment plan.
- Factor in all of the numbers. The mortgage payment is only one of the obligations you take on with a new house. Little things like property taxes, homeowner’s insurance, mortgage insurance, HOA, utilities, and upgrades can increase the amount of money you need to spend each month to be in a home. Plus, there is ALWAYS something to fix when owning a home – dishwasher repair, roof leak, broken lawnmower, etc. To better anticipate monthly expenses, talk to a realtor or other homeowners in the area you’re considering.
- Love the house, not just the price. Chances are that your first home won’t be your last, so go into the deal knowing that one day you’ll be trying to convince other families to buy the very house you’re going to be living in. Besides price, what else does the home have to offer? Consider: Proximity to grocery store, school districts, public transportation, the year the home was built, quirky features, size of the yard, status of the neighborhood, etc.
- Focus on the Big Stuff. Carpets can be changed out and walls can be painted fairly inexpensively. Replacing a heater, adding an air conditioner, upgrading a roof, and so forth are bigger investments. Think about the ones you’re willing to make versus those you hope to pass on to the next home buyer. And remember, new home buyers expect a house to have functioning appliances and a good roof—they don’t pay extra for those things.