Insider's Guide to Saving Money &
Eliminating Risks When Buying Your First Home!
Chapter 3 – Watching The Market
Watching The Housing Market
For the past year, the housing market has been favoring buyers. Soaring market values were short-lived as many people decided they just could not afford to live in certain areas because of the cost of housing.
This has caused many sellers to lower their prices. While this sounds like good news for you, the housing market can be very fickle.
Depending on where you want to live, you may end up having to pay a small fortune for the home of your dreams.
This is why watching the market, surveying neighborhoods, and finding a good agent will help you in your search.
While you should not become a slave to the housing market, you should keep the following in mind before buying your first home:
- The past market value of the home you are interested in buying.
- How much house your budget can get you in different neighborhoods and towns.
- Neighborhood value.
- How much the home should increase over time, and
- Price reductions that may be available.
Just because you buy a home for a great deal does not mean you will make a huge profit when it is time to sell it. The housing market will continue to change and since this is your first home, you may want to choose something you can pay off quickly and make a larger profit on in the future.
Also, remember that any improvements you make on the home will increase its overall value. Just don’t spend too much money on improvements. Creating a home improvement budget and sticking with it will help you make those monthly mortgage payments and other payments that will be due.
One of the biggest mistakes that first time homeowners can make is buying a home for a lot less than they budgeted and then making improvements that will end up costing more money in the end. If you can find a great deal on a home, use that extra money as a cushion in case you lose your job or are too ill to work.
Owning a home is a big responsibility. Knowing how the market is moving and spending your money wisely will help when you are creating a budget, applying for a mortgage, and deciding how much to put down on a home.
Making The Most Of The Housing Market
While you should be watching the housing market, there are other areas of interest you should be watching also, such as:
- National interest rates for mortgages.
- Building rates in your area.
- Number of foreclosures in your area, and
- Stock market and gasoline prices.
National Interest Rates For Mortgages
Even though the housing market may be going your way does not mean that the interest rates you could be paying are. In the times when the housing market has taken a slump, interest rates tend to rise in order to retain the natural balance within the economy.
The interest rate you receive will depend on many factors, including:
- Other loans
- Current credit score
- Credit history
- Number of credit cards
- Yearly income
- Owed debts
- Current interest rates
- Type of lender
- Time of year, and
- Adjustable and fixed rate mortgage
If you see housing prices dropping, you may opt to buy a larger home than you would have if the prices had been higher a year ago. While you will be saving money on that end, you may be paying more each month because of the interest rate you received.
Building Rates In Your Area
If you notice the housing market has also caused the building of new homes in your area to decrease, then you may have to enter into a bidding war in order to buy your first home. When new home construction goes down, this can mean one of several things:
- The area is no longer popular.
- The interest in buying a new home has diminished.
- People can no longer afford to purchase new homes.
- People are opting for older homes that are less expensive to heat and keep cool during the year.
While that housing slump may bring a reduction of housing prices, you should consider making a bid soon after finding the home of your dreams because bidding wars will only end up costing your more money.
Number Of Foreclosures In Your Area
When looking for a home, you should consider looking at homes that are under foreclosure. This can be for many reasons, but usually banks that hold the titles want to unload these homes quickly so that they do not lose more money than necessary. Many times auctions will be held or the home will be advertised as a foreclosure in the newspaper or online.
You should check out these homes because you may find exactly what you are looking for in a home.
Stock Market And Gasoline Prices
Even if you do not play the stock market game or own a car, you should still pay attention to these areas because they are usually what will dictate housing prices and the cost to heat and cool the home.
When the stock market is doing well many people will spend their money more freely, which will give way to higher housing prices. But when gasoline prices go up so will the price to heat and cool a home, which may make homebuyers reconsider buying until the prices fall again.
This could be a good time to buy a home if you are willing to pay a little more each month in utility costs.
The impact society can have on the housing market can be huge, and it can also have lasting affects. Buyer’s market’s are created when there are more homes available than buyers, while seller’s market occurs when there are more people who want to purchase homes than there are for sale. These housing markets go back and forth due to issues mentioned above.
In The End
Buy a home when you are ready. Many times, people will buy a home because it is cheaper in the long run than paying rent each month.
The downside to home ownership is that you have to make your mortgage payments on time each month. Very few lenders will give you more time to come up with the money.
If you miss even one payment, your home could be foreclosed upon. You will have no place to live and your credit score will suffer severely.
If you can afford to make the move into your new home now, you should not wait too long before making an offer. The housing market can change quickly and with competition out there, you may end up losing more money if you don’t make an offer after seeing a home that you like.
Rent To Own
Another option you may have is to buy the property you are currently renting or rent a property that also offers you the option to buy after a certain amount of time. This will give you a chance to see if you like living in the home and will give you time to get your finances in order.
Rent to own properties are usually older than other homes and have been rental properties for some time. This means that they may not be in great shape. If you are looking for a property that you don’t mind repairing, then this option may be for you.
When looking at a rent to own property, you should ask the following questions:
- How old is the home?
- How many times has it been rented out?
- What is the mortgage payment on the home?
- What is the rent per month for the home?
- How long will I have to make my decision?
- What happens if I change my mind?
- What happens if the home owner changes their mind?
You should still sign the proper contracts stating that you are interested in buying the home after the given time period. This will protect your rights and the rights of the current homeowner.
New Homes
When you think of your first home, you may be thinking of a brand new home. Since the housing market is favoring buyers at the moment, you may get a great deal from a builder that is developing a new housing community, or you may find a plot of land that is in an existing community. This can be a great alternative to buying an older home for many reasons:
- You will have a part in designing the home.
- You will have new appliances and lighting fixtures.
- You will have new carpeting and flooring.
- You will be able to choose all of the fixtures, carpeting, and flooring.
- You will be able to add a porch or a patio, and
- You will be able to place the home where you want it on your property.
A new home can be very exciting, but it can also be a lot of extra work. The first step in buying a new home is to find property. You should visit builders and real estate agents who will file all of the necessary paperwork, permits, and other items needed to build on the property. This can take a few weeks, so be sure to plan accordingly.
The next step is to design the home. This is the fun part where you will get to personalize your home to suit your needs.
Once you have been approved for a mortgage, the property has passed all of the land inspections, and the home has been designed, construction will begin. Depending on the time of year, you will have to wait about 3-6 months before you can move into your new home.
After construction is complete, you should complete a walk through of the home, check all of the fixtures, and have the home inspected before signing the final paperwork. Then the home is yours.
Many people hire a lawyer during the construction phase so that all of the paperwork has been filed and there are no problems during the walk through.
Buying a new home is just one more option you should consider when looking for your first home. Home construction can vary, as there are a few ways to build a home, including pre-fab homes that will be built elsewhere and delivered to your property where they will be assembled. Look into all of your options before deciding on a home that is right for you and your budget.
Using The Housing Market To Your Advantage
By paying attention to current housing trends and keeping a watchful eye on the homes in your area, you will be able to make an offer on a home that will be accepted.
While the market is continually changing, it is a useful tool for those who are on a budget, who want to find a home that is large enough to suit their needs, and will be worth more when it is time to sell it.
When watching the housing market, consider the following:
- The number of homes that are in your area.
- The number of days the homes have been on the market.
- The price of a new home compared to those that are being sold by homeowners.
- The price of renting vs. buying.
- The number of homes that are in your price range.
- The highest price you can pay when buying a home.
- Interest rates in comparison to housing prices, and
- The time of year.
Springtime is a good time to buy a home for several reasons:
- More people want to sell.
- It is easier to make appointments to view homes.
- Prices are usually lower.
- People are more willing to reduce their asking price.
- Income tax returns can help with a buyer’s budget.
There will be plenty of people who could not sell their homes in the fall or winter months and who are trying to sell before the summertime. Homeowners that need to sell their homes before a certain time are more willing to reduce the price of their homes.
While you should consider looking at a home during any time of the year, you will find that many homes will be lower in the spring to attract buyers.
This is also the time when interest rates are re-evaluated and many lenders are willing to give loans to those whose credit is not the best. Take advantage of when interest rates are at their lowest even if it means accepting an adjustable rate mortgage. You will have the option of locking into a fixed rate at a later time.
While the housing market can change, the idea of selling one’s home will not. Homeowners may choose to wait out the current housing market, but if they are eager to buy another home or move to a new place, their wait will be short-lived.
Negotiate with homeowners until a fair price can be reached. This is the same practice during a sellers market as in a buyers market. You may have to play the bidding game for a week or two, but in the end, it is the person who needs to make the transaction happen the most that will end up compromising the most.
Next: Chapter 4: Home Inspections 101
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