Many of the old rules and adages regarding buying and selling real estate have changed dramatically in the last few years. For many years, people bought homes as an investment as well as a place to live. They depended on the ever- rising housing prices to protect them with a hedge against inflation. As most people now realize, since approximately 2008, the price of most homes have dropped, in what the business and news media, in another of their oversimplifications, have referred to as the end of the housing bubble. While it is true that house prices for over a decade rose at an unrealistically fast pace, the root cause of the drop in housing prices/ values is probably far more related to the general economic downturn in the United States, and the rest of the world, as well as the continuation of the large unemployment rate. Today’s housing market has, however, some amazing buying opportunities for individuals with good credit, enough funds to put down as a down payment, and both the need and/ or desire to move into a different and/ or new home.
1. Historically, banks and mortgage companies required a significant down payment, usually twenty percent. Those with good credit but insufficient available funds for that size down payment, were often permitted to put down ten percent, but were then required to secure and pay for something known as P.M.I. (a special form of insurance to protect the lender). Then during the housing bubble years (predominantly in the 1990’s), many lenders eased up restrictions, some even lending more than one hundred percent of the value of the home. Obviously, when housing values dropped, this meant that there was more mortgage remaining than value, which was certainly a factor in the burgeoning mortgage crisis. We are at a point in time now that home mortgage rates are at a historically low interest rate, thus meaning that a buyer’s monthly payment becomes significantly reduced. Most buyers are more concerned with their carrying charges than the actual dollar amount of the house. While lenders are now offering mortgages, they are more strictly appraising the value of a home, and generally lending only up to 80{919468b76a1b111b1791bdf3e51426d8562c963af300c016649515c15309dd6c} of the appraised value. They are also stricter in their requirements for credit worthiness of applicants. However, for those with good credit, and the sufficient amount of down payment, these mortgages are comparatively a bargain!
2. In addition to low mortgage rates, home prices are dramatically lower than they have been in some time, and in some areas of the country, even more significantly so. These low prices mean that the 20{919468b76a1b111b1791bdf3e51426d8562c963af300c016649515c15309dd6c} down payment can therefore result in less out of pocket expense to the home buyer. Obviously, the combination of low prices with low mortgage interest rates means significantly lower monthly charges for a homeowner.
3. However, as most people know, most people would say that the housing market has undergone a significant and prolonged slump, do primarily to overall economic conditions. There are also fewer eligible and potential buyers, because of the combination of the large number people unemployed or under- employed, as well as the more stringent credit conditions. Houses are remaining on the market in many cases for a far longer period of time, because many buyers have adopted the attitude that their is no or limited urgency for them to take quick action.
The further complication is that, in many cases, both buyers and sellers are often unrealistic. Many sellers remember what houses went for a few years ago, and put their houses up for sale at higher than market value. Many buyers have adopted the attitude that they won’t act unless they can “steal” the house. My advice to anyone who wishes to sell their home and maximize return, is to price it right to sell from the start. Most studies show that sellers generally receive their best offers in the first three weeks after its listed, and that houses that are priced too high lose that opportunity. When a house stays on the market for a while, the market for that house often drops as a result, as buyers today know that the house has been on the market for a while, and often offer far lower prices for those houses. In addition, I recommend that qualified buyers look carefully at the actual market value of a home they are considering (a professional Realtor can help a buyer do so by preparing Comparative Market Analysis, but these are only relevant if similar properties that have sold quite recently are the only ones included, and that a buyer also know what else is on the market and at what price, for comparison purposes). It’s still a good Buyer’s Market, for realistic buyers to get a fair, but great value.
