22 Jan Home Buyers: Do you Feel the Power?
Home Prices Dropping Again
I happened to be talking to a realtor friend of mine this morning. She mentioned that home prices in our area declined 10% in the last year. In fact, they’ve declined 10% each year for several years in a row. That puts homes in our local market at 2002-2003 price levels. Not good news for someone (me) thinking about listing his house again this spring.
For prospective sellers, this set of statistics is enough to put your heart in your throat. Nobody wants to hear their house is worth less than it was several years ago. For many homeowners, it’s even worse news because it’s worth less than they paid for it. And for some it means the worst news: the home is worth less than they owe on the mortgage.
Bad housing market is actually good (for some)
But all is not doom and gloom. There is a glimmer of hope in this dark sea of despair. For although sellers stand to lose a healthy chunk of money when they move out of their home, they also stand to gain a lot on the other end when they buy a different home. Home prices are really low, which means there are a lot of bargains out there.
In my family’s case, we know we’ll lose money if/when we sell our house. But we also know when that happens we’ll be able to buy some really good deals and move into a home that is ready to appreciate rapidly when the market does turn around.
For people looking to buy their first home, or even fixer-uppers, this is a great market as well. Low home prices mean you can get some great deals. It doesn’t cost much to make some major improvements in the house, like installing composite doors or new carpeting. A little money goes a long way when you can buy a house so inexpensively.
Power has shifted to the home buyer
These are historic times for home buyers. Record low interest rates, huge numbers of foreclosures on the market, plenty of short sales available, and motivated sellers create an almost perfect storm for consumers looking to buy. Plus, there’s more information at the buyers’ fingertips than ever before. Buyers can find a property online and search relative property prices to get a feel for the value of a neighborhood. They can even watch virtual tours of a property and get a good feel for the home without having to drive over and check it out.
Buyers also have the upper hand in today’s market when it comes to negotiating. It doesn’t matter how nice your house is. The buyer can and will pick your home apart to find things for you to fix before they buy it. Or they’ll list all the things that are wrong with the house and use that list as justification to lower the price. Why are more buyers doing this in today’s market? Because they can. The power is in the hand of the buyer!
Buying a home isn’t for everyone
Unfortunately not everyone looking to sell is going to be buying another house right away. It’s not the end of the world to rent, especially if it’s an end to a means like paying off debts and straightening out your finances. Believe me, that’s a good thing. That puts you in a position to later purchase a home after you’ve had time to eliminate debt, build an emergency fund, and save up a down payment.
When you’re able to do these things, you’re in a position to make your home purchase a blessing instead of a curse. When you’re able to do these things and time it right before the market turns around, you’re really maximizing your buying potential and setting yourself up for success.
Readers: Do you plan to buy or sell a home in 2012? What are your reasons for or against doing so?