Affordability returns to housing, and buyers have loads of negotiating power
People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you're brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.
Ask for price reductions, improvements, closing costs -- whatever -- and the seller, desperately trying to get a contract, is very likely to work with you. When the market starts improving, your negotiating power starts to diminish, he added.
Home buying & selling
Move away from the herd of buyers sitting on the fence. This gives you less competition to negotiate deals and what you want. Once the other buyers start jumping off the fence because they feel it might be safe to buy and safety in mumbers you have lost your opportunity to negotiate by yourself and you loose that edge.
If you're qualified to buy a home now, the purchase makes sense for your situation and you're prepared to live in that home for at least five years, there are five reasons why you may be headed for a great deal:
1. Affordability is better than ever
According to the National Association of Realtors' housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970. The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income.
2. You have a large inventory to choose from
In many places it is taking months to sell a home, creating loads of inventory -- from new homes to existing homes to foreclosures. A large selection gives buyers more choices and drives down prices. And home sellers have gotten the picture. Buyers can take advantage. But if you put off a purchase until inventory shrinks substantially, you might not get as good a price. It's nearly impossible to time the exact bottom of the housing market and even if you do there's no guarantee you'll get the best deal.
"You buy for quality of life... don't buy on speculation," said Duane Andrews, CEO of Clear Capital.
3. Builders are offering big discounts
Home builders are getting even more aggressive with their pricing.
In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances, he said.
4. Mortgage rates are historically low
It's not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac. (The current limit is $417,000, although that can rise as high as $725,500 in high-cost markets.) Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks.
5. You can get a federal tax credit
There's currently a federal credit of up to $8,000 for home buyers who haven't owned a home in at least three years. The credit repayment feature is removed in the economic stimulus plan that passed in the House of Representatives.
That extra cash will come in handy:
Waiting for further federal developments, however, might sap a buyer's negotiating power, as more people get back into the market and competition returns,
"The more Washington gives, demand will increase,"
Source (Five reasons not to buy a home this year Homes are more affordable, but don't rush -- prices won't skyrocket soon By Amy Hoak, MarketWatch
Last update: 12:15 a.m. EST Feb. 6, 2009
