5 reasons to buy a home this year
Mar 25th, 2009 by Catherine Duncan
Affordability returns to housing, and buyers have loads of negotiating power.
Many people are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you’re brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.
Ask for price reductions, improvements, closing costs — whatever — and the seller, desperate to get a contract, is likely to work with you but when the market starts improving, your negotiating power will start to diminish.
People can get a lot of what they need and almost all of what they want today. Once a few people get off the fence, there’s safety in numbers and you lose your leverage.
If you’re qualified to buy a home now, and the purchase makes sense for your situation, and you’re prepared to live in that home for at least five years, there are five reasons you may be headed for a great deal:
1. Affordability is better than ever.
According to the National Association of Realtors’
housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970. The NAR’s affordability index is a measure of the relationship between home prices, mortgage interest rates and family income. An a saturated market like our current market in the Charlotte and Lake Norman areas many homes are selling for a lot less than the list price. In my opinion, it never hurts to try for the lowest price possible. Many sellers are willing to lower their price, offer incentives and seller concessions just to get the home sold.
2. You have a large inventory to choose from.
In many places it is taking months to sell a home, creating loads of inventory — from new homes to existing homes to foreclosures. There was a 12.9-month supply of inventory in December given that month’s sales pace, according to NAR.
A large selection gives buyers more choices and drives down prices. And home sellers have gotten the picture.
It’s fair to say that home sellers have become increasingly desperate. People who have had for-sale signs in the yard for six months are starting to become in tune with the reality of the situation and buyers can take advantage.
But if you put off a purchase until inventory shrinks substantially, you might not get as good a price. And be forewarned: It’s nearly impossible to time the exact bottom of the housing market, and even if you do, there’s no guarantee you’ll make a killing.
Buy for quality of life . . . don’t buy on speculation. Historically, real estate appreciates about 5% a year over the long term.
3. Builders are offering big discounts.
Home builders are getting even more aggressive with their pricing.
In fact, it is recommended to look at completed new homes first because builders are offering such steep discounts. Plus, you’d have a warranty not only on the home itself, but also on the home’s appliances.
Builders want to save their credit, save their brand, save their reputation and clear out inventory. They WANT to sell. They know that they can go buy cheap land today with that cash.
Walk in with a preapproval for a mortgage, make an offer, and then walk away without making a deal if you have to. Chances are, a builder will call back and reconsider that offer rather than let a potential buyer get away.
4. Mortgage rates are historically low.
It’s not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac.
Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks.
More mortgage help could also be on the way. Last week, President Obama said that his new economic plan would help lower the cost of mortgages for home buyers, although he did not give specifics.
But low rates don’t mean lenders are handing out mortgages easily. You’ll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those great rates — if you can qualify at all.
5. You can get a federal tax credit.
There’s currently a federal credit of up to $8,000. That money would not have to be paid back if the home is not resold for at least three years.
That extra cash will come in handy: The average first-time homebuyer spends about $6,000 in the first six months of owning a home.
