Wednesday, March 11, 2009

What to Do in a Depressed Real Estate Market?

With the economy and real estate market in the pits, many people are wondering, is it the right time to buy a house? Are you confused about what to do in a depressed economy when it comes to purchasing a home? Well you're not the only one! Every where you turn financial experts are providing advice about what to do in the current real estate market. And what's frustrating is that the advice tends to differ depending on whom you talk to or what publication you are reading! Some experts predict recovery is on the horizon, maybe even before the end of 2009, while others hold little hope for an immediate recovery, giving another 5-10 years before things turn around.
Well what are we supposed to believe? What's clear to everyone is that the economy is the poorest it has been in decades due to the sub-prime mortgage meltdown - which involves high default rates on the sub-prime and other adjustable rate mortgages, the negative amortization teaser loans resetting - which is causing more homes to be available on the market, home-builders inflating the value of homes, and homebuyers abusing the refinancing system and using their homes as ATMs.

So is it the right time to buy?
The inventory is huge, flooded with foreclosures, REOs (bank owned properties) and short sales. Many buyers who have adjustable rate mortgages -also known as ARMs, or used 100% financing as a vehicle to purchase a home see their interest rates adjusting and some are beginning to lose their homes with many more to lose theirs in the future. With so many homes on the market, it's a buyers market and sellers (both banks and homeowners) are forced to drastically reduce prices if they want to sell their property. They are fiercely competing against one another for a small pool of qualified home buyers, which allows the potential purchaser to negotiate better pricing for the home. Alot of sellers are even throwing in incentives, to "sweeten the deal" in the hopes they'll be able to get rid of their properties sooner.
Also, with interest rates at near historic lows, homebuyers have the opportunity to pay less interest on their next home purchase, which can be a significant reduction in cost. If you wait to buy a home there is a possibility interest rates will go up.
People in the best position to buy have researched the current housing market, the areas they want to live in, have good credit and have sufficient savings in the bank.

In any market, especially today's market, real estate should be looked at as a long term investment. Property values are not going to increase like we've seen in the past few years. Be realistic. Really consider all of your options. Take your time and find a home that fits your needs and your pocketbook. Compare prices of other homes in the neighborhood, evaluate the amenities, your commute to and from work, the school systems, and other features. Have your credit in tip-top shape, get pre-qualified with a reputable lender, and have cash available in the bank for a down-payment, closing costs and any immediate improvements you may need to make to your new home. Be prepared for the REOs, short sales and foreclosures that will be available. As good deals come on the market you may need to make an offer immediately to ensure you get the property you want. Never think you can wait to make an offer...Good deals usually don't last! Find a local real estate agent you trust and one you feel can do the job of negotiating the best deal for you and your family. Never offer the asking price unless you know for sure there are other offers on the table and this is the house you just have to have. In most situations, I would suggest making an offer under the list price to and see what kind of deal you can get.

Regardless of the market conditions, you must be educated and prepared to make a move when the time is right for YOU!

Happy House Hunting

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