Buying A Home In A Down Market

I know the Real Estate Market looks bleak right now. Sellers are thinking: I will never be able to sell my home and buyers are thinking: I will never be able to get a loan in this market. In this case, it could be perception is your reality. Everybody wants to know how to best time the market when buying a home. It's just natural - especially if you're thinking about buying in a down market where home prices are declining. You wonder how low they will go and whether you should wait, right?

Some Home Buyers Should Buy Immediately

You're probably thinking: "Of course, he would say that. He's a Realtor, and agents always say 'Now is the best time to buy'." Well, here is why: If you are a seller who wants to move up to a more expensive home in a down market, now could be the best time. The longer you wait to sell, the lower the price of your home could fall. If you can arrange for alternate housing, a smart strategy is selling now, waiting a few months, then buying your new home. If you sell and buy simultaneously, you'll still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale.

Consider the "Loss" on Selling Your Present Home

For example, say your present house is worth $300,000, but because of high inventory and few buyers, you must price it right and reduce your price by 10 discount or $450,000. This would mean you had saved $50,000.

Review of Selling and Buying Numbers

1. So you "lost" $30,000 on the sale of your home 2. But you "made" $50,000 on the purchase of your new home 3. Doesn't that put you $20,000 ahead?

Don't Forget the Impact of Interest Rates

Which way are interest rates moving? Are they moving up or moving down? If interest rates are near an all-time low and beginning to inch upwards, waiting could cost you more than you would think. You might not be able to afford to buy a home at any price.

? FACT: Each 1/2 point increase in your interest rate gives you $25,000 less in purchasing power.

? FACT: Each 1 point increase in your interest rate gives you $50,000 less in purchasing power.

? FACT: Each 2 point increase in your interest rate gives you $100,000 less in purchasing power.

Look at the Differences Among Purchase Prices versus Interest Rates

If you put down 20 loan, here are your principal and interest payments on the following purchase prices: $425,000 sales price, at 8.25 interest, your payment is $2,579. $475,000 sales price, at 7.25 interest, your payment is $2,594. $525,000 sales price, at 6.25 is $100,000 less than the home you can afford to buy at 6.25%. If you wait for prices to further decline, the perceived value could be lost due to higher rates.

Sellers

Despite the constant barrage of negative Real Estate news, keep your head up. Look at it in a more positive light. The thought that homes arent selling is just not true. You need to understand that you have to price it right. You CAN NOT say lets put it on the market for XYZ and if we dont get a lot of interest, we can lower the price. That is the kiss of death. Like most Realtors, I want to list your home! Thats what Im here for and thats how I get paid. BUT, I have had to turn down a listing or two because the sellers had unreal expectations. Make sure you find a Realtor who will tell it to you straight, lumps and all. Anyone can be a yes man and that is robbing you of precious time and money!

Buyers

YES, you can get financed. Just because lenders have tightened their belts on loans doesnt mean you cant get one! Like I mentioned before, mortgage applications are up and the rates have been slashed. Now is the time to buy a home! Sellers are competing for your business. You no longer have to settle. Regardless of all the negative information floating around, there is always a silver lining. In this case, sellers can sell and buyers can buy. A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don't panic over newspaper headlines, make an informed decision, run your own numbers then do what feels right to you.