I was reading a Yahoo! Finance story this morning about housing prices and saw that for the first time in a long time, prices might be falling. Are you looking for a house? Now might be the perfect time.
What’s happening with the housing market?
Let’s talk first about the market. You definitely don’t want to buy a home when the market is hot….and the trend is in a seller’s favor. But if prices are dipping and the number of people buying is light, you’re more likely to find a steal. However, real estate markets are very much regional, not national, like the stock market. That means that while prices might be tanking in Las Vegas, they could be rising in Miami. It’s important to check with pros in your area to see just how weak your local market is before wandering off into the home buying scene.
A weak market means more desperate sellers, so do brush up on your negotiation skills. A few thoughts on this front:
- Remember that the seller isn’t your friend. It’s up to them to put their best foot forward and make their best deal.
- You aren’t trying to “put the screws” to someone when you negotiate. You’re only trying to adequately protect your interest, which means paying as little as possible.
- Don’t expect your real estate agent to negotiate on your behalf. Studies have also shown that real estate agents prefer not to negotiate (mostly because when you consider how they make money….on the sale price….there’s no real incentive for them to bargain).
Okay, the market might be right, but should I buy?
Anyone can look at market trends and think “Now’s the right time,” but it’s much more personal to ask “Is it the right time for me?” That’s the much better question, isn’t it?
Here’s how to know if it’s the right time for you:
- You’re going to need money for a down payment and for furniture, immediate maintenance and initial decorating. Where is this going to come from? If you’re betting on mortgages that allow you to have “zero down” like in the days prior to 2008-2009, think again. You’ll need a downpayment of at least 10% and most probably 20% to secure a home. You also might have, among other expenses, closing costs on the transaction and an initial payment for homeowner’s insurance.
- You don’t want to spend every last penny on your house, so you should also be able to maintain an emergency fund worth a few month’s expenses.
- Mortgage companies are going to severely examine your credit. Grab a copy yourself to make sure that there aren’t weaknesses in your credit score. ABC News has reported that over 90% of credit reports have at least one problem. You’ll want to avoid credit surprises during the process and secure lower interest rates by driving your credit score as high as possible.
Beyond those economic numbers, there are other considerations. Home ownership is a big responsibility and can also be a time sink. Instead of calling your landlord to fix the oven, that becomes your problem. Have you thought about the effects (positive and negative) owning a home will have on your craft?
There’s a reason many people are deciding that renting is for them. Simply put: it’s easier to hand the hassles over to someone else than to focus on the (often large) expenses of keeping your property up-to-date.
Isn’t owning property a good investment?
Yes, real estate IS a good investment, but I’d argue that calling the home you live in an “investment” is a bad idea, for many reasons.
- There’s a big difference between a house and a “home.” You’re emotional about your home. You shouldn’t be emotional about investments.
- Investments are bought to be sold. Who wants to sell the place where they’ve made lots of memories?
- You’ll work on upkeep differently on a house you live in than an investment. If you’re investing in a property, you’ll make sure it’s “good enough.” However, because your own home is special, you’ll spend extra on items/fixes that’ll never add to resale value.
In short, you should buy a house because it fits your lifestyle, supports your craft AND is maybe going to appreciate in value. While I think you should make a good investment decision with a home you live in, you shouldn’t consider it an “investment” unless you’re only talking about an investment in you. If owning a home is a part of your goals and supports your creative dreams, then get going! This just might be a great time to make that move.