5. There’s no such thing as “the real estate market”
Most media reports about the housing market focus on national statistics such as sales volume and median home prices. The often-repeated statement that all real estate is local is often repeated because it’s true. It’s interesting to hear about the ups-and-downs of the U.S. real estate market, but those reports really are only useful in the context of local real estate markets.
In reality, the national real estate market is made up of thousands of local neighborhoods, each with its own unique circumstances. The local economy, employment picture, tax situation and government policies will have more influence on local housing markets than any national trends.
That’s why homes in some neighborhoods continue to sell for the asking price, while across town other languish on the market despite multiple price cuts.
The difference might be better schools, an exclusive location or just a neighborhood with a prestigious name. Even within the same neighborhood, Victorian-style homes may be selling well, while Colonial models sit unsold. A condo with a striking skyline view will sell better than an identical unit facing a parking lot and a dumpster. That condo doesn’t have much impact on the national real estate market – and vice versa.
The best way to protect against buying at the wrong time? Sell at the right time. In many cases you can’t control when to sell, but you should plan on keeping your home at least six or seven years.
4. Finding value is easier in a tough market
Rich Dad Poor Dad author Robert Kiyosaki uses the example of a sale at the local supermarket to illustrate a common investor mistake – focusing on price movements instead of value. He notes that if a supermarket held a “25% off everything in the store” sale, the store would be packed.
But when prices plunge in the stock market or real estate market, many investors hear the bad news and head for the sidelines until prices begin climbing again. In any market, it’s important to consider value along with price. Supply and demand dictates that real estate values are easier to find in slow periods and become harder to find when markets heat up.
So what’s lasting value? Here’s a list of homebuyers’ most sought-after features, according to the NAR:
If you have looked in the past and not found these features in your price range, it may be time to check again, while properties are “on sale.” Be sure to consider features that will make homes more valuable in the future, such as energy-efficient construction and appliances and shorter commuting times. Features like water or mountain views, good schools, recreation opportunities and unique architecture never go out of style.
Source: NAR 2008 Profile of Buyer’s Home Feature Preferences
3. There is more than one yardstick
How slow is the real estate market? It depends whom you ask, and how they measure. Real Trends, one of the industry’s most respected research organizations, recently reported year-over-year changes range from -4.6 percent by the Office of Federal Housing Enterprise Oversight (OFHEO) to -20.01 percent by a group called Integrated Asset Services.
The wide range doesn’t necessarily mean one index is more accurate than another. It means that indexes use different methods of gathering data, and often different sample populations. For many real estate professionals, it’s important to know the details of housing price trends. For home buyers, it’s more important to put the broad numbers in perspective. They may provide a good indicator of market trends, but they will never be as important as what’s happening in your neighborhood and your personal situation.
2. The concession stand is open
Home buyers can always ask for concessions, but in today’s market they have increased leverage to get them. In many parts of the country, buyers are not only getting price concessions, but often help with closing costs. Agents who understand the nature of seller concessions can often help buyers get a better deal above and beyond reductions in sale price.
But in today’s market where homes sell slowly and lots of inventory is available, the advantage shifts to the buyer side. In some areas of the country, sellers are not only paying closing and prepaid costs, but also some creative additions such as luxury cars, boats and furnishings. Sellers may be willing to make concessions other than dropping the home price, as there are often tax advantages involved. With some assistance from their real estate and mortgage professionals, buyers and sellers can often put together concession packages that benefit both parties and get the home sold quickly.
1. Financing is favorable…for now
Getting nervous buyers off the fence is one of the toughest challenges facing real estate pros right now. People are concerned about buying a home that will drop in value in the coming months. But buying a home is a long-term investment, and there’s more to consider than the just the purchase price.
Depending on the rate and the amount financed, the price of financing can easily exceed the price of the home. Rates have continued to drop in recent months. In historical terms, mortgage financing has never been a better bargain. From 1980 to today the 30-year fixed rate mortgage has ranged from more than 18 percent to less than 5 percent, says Jim Elfelt, a mortgage banker in Virginia Beach, Virginia. If you’re waiting for home prices to come down another $10,000, you may pay more in the long run if mortgage rates rise in the meantime.
When you’re looking for a bargain, don’t lose sight of the big picture. If you try to time the market to save a few thousand on the price of a home, you could end up with a higher monthly payment and total overall cost of home ownership. At the end of the day, your personal and family situation will determine when it’s the right time to buy a home. As you weigh the pros and cons of owning versus renting, do some research as to exactly what you can afford using some of the affordability calculators available on the Internet. At the same time, your local real estate professional can help you research and understand your local market and the types of homes available.