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.
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 Oversight (OFHEO) to -20.01 percent by a group called Integrated Asset Services.
4. Finding value is easier in a tough market: Rich Dad Poor Dad author Richard 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 hard to find when markets heat up.
5. There’s no such thing as “the real estate market”: Most media reports about housing market focus on national statistics such as sales volume and median home prices. 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 home in some neighborhoods continue to sell for the asking price, while across town others languish on the market despite multiple price cuts.
6. Market timing is far from perfect: No one wants to purchase a home only to see its value decline. But should you wait to buy a home until prices bottom out? A quick web search will yield a number of articles and opinions for and against timing the real estate market, but beware of those in favor of market timing who also want to sell you a how-to book or system. The longer you own your home, the better chance you have of building wealth and protecting yourself from the markets ups and downs.
7. Home ownership builds equity: Some people just don’t have the discipline to set aside money each month to save and invest. In this case, a home is more than a shelter; it acts as a sort of an automatic savings account. You can build your savings in two ways:
First, each month a portion of your payment goes toward the principal to build equity in your home. In the early years of the mortgage, most of your payment goes toward interest. Over time, however, that turns around and your equity growth begins to accelerate.
Second,
8. Long term, owning usually beats renting: In recent years, the cost of buying a home in most markets increased while the cost of renting remains flat. But it’s never a good idea to base long-term investment decisions on short-term conditions. If you decide to rent instead of purchasing a home, you may be in a bad spot in the cost to rentals in your area shoot up.
Typically. A weak housing market corresponds with a strong rental market. If the rental market is strong in your area, it may indicate weakness in the local housing market, which typically favors buyers over sellers.
When you buy a home with a fixed-rate mortgage, you can lock in a predictable monthly payment for 15 or 30 years. That means the largest part of your housing costs, principal and interest, are fixed. For some people, that stability, along with the sense of community that comes from being a homeowner, is enough to tip the scales towards ownership.
If the monthly cost of buying vs. renting is comparable, you may consider some related factors to help you decide. When you rent, your landlord receives any appreciation and tax breaks associated with owning the property. If you plan on any significant remodeling, buying may be also preferable to renting.
9. Uncle Sam wants you…to be a homeowner! Wouldn’t it be great if the government kicks in some money to help make home ownership more affordable? Because of deductions on mortgage interest and property taxes, the practical effect is that the government is subsidizing your home purchase. In fact, home ownership provides two of the best ways to reduce your tax bill.
Mortgage interest you pay can be deducted from your gross income to reduce your taxable income. Property taxes may also be deducted from your gross income, lowering your overall annual tax obligation.
Speaking of tax smarts, be sure to also consult your advisor about tax breaks that may be available on the proceeds from selling your current home, and on any “points” paid when taking out a mortgage loan.
10. The news is bad…for a reason:
Quick…which is the more exciting scenario?
A man walks slowly down a flight of stairs, sometimes pausing or retracing his steps until he reaches a floor. After trudging along for a while, he notices another staircase and begins ascending, occasionally pausing or taking a step back before methodically proceeding upward.
A second man hurtles down a terrifically high flight of stairs. Ignoring the safety railings, he runs recklessly downward, dodging obstacles in his path as he goes. He suddenly cries out as he loses his footing, sails through the air, tumbles down several flights of stairs in a spectacular crash. The badly injured man is bandaged from head to toe and attached to a variety of beeping, flashing medical devices that monitor his vital signs. Experts debate his condition but agree that the situation is dire and prospects for recovery uncertain.
