Today’s housing market – Why it may be time to buy.

Everyone is aware of the challenges the housing market faces on a national level, but for savvy buyers, the long-term benefits of home ownership and the opportunities that exist in today’s local markets.

Financing is favorable, so take advantage now

In volatile times, buyers and sellers may be scared to the sidelines by shifting home prices. But these are two important points to consider:

First, in a down market, it’s easy to lose sight of the fact that real estate is a long-term investment. Historically speaking, it’s one of the best investments you can make.

Second, interest rates are historically low right now, and they can have a much greater effect on affordability than home prices. For example, suppose you are taking out a $300,000 loan, to buy a home with zero down at 6 percent (Let’s also assume you have excellent credit).

The principal, or cost of the home is $300,000. The interest, or cost of credit is $347,515 – more than the price of the home, even at a modest 6 percent rate.

In historical terms, mortgage financing is still a great bargain. From 1980 to today the 30-year fixed rate mortgage has ranged from more than 18 percent to less than 5 percent. If you’re waiting for a home prices to come down another $10,000, you may be missing the big picture because a small increase in the cost of credit can quickly offset a reduction in a home’s sale price.

For example, suppose you’re applying for a 30-year, fixed-rate $300,000 mortgage. Note how a small change in rate can makes major difference in your monthly payment and the overall cost of your home through the years:

Interest rate	Principal	Total Interest paid	Monthly Payment	Total Cost, Principal & Interest	Total Additional Cost
6%	300,000	347,515	1,799	647,515	0
6.25%	300,000	364,975	1,847	664,975	17,460
6.50%	300,000	382,633	1,896	682,633	35,118
6.75%	300,000	400,486	1,946	700,486	52,971
7%	300,000	418,527	1,996	718,527	71,012

Be price sensitive, but interest rate savvy.

As you can see, a single percentage point on your mortgage has a huge effect on a home’s affordability. The moral? When you’re looking for a bargain, it’s easy to focus on sales price, but be sure you’re not losing sight of the big picture. If you try to time the market to save a few thousand on the price of a home, you might end up with a higher monthly payment and total overall cost of home ownership.

Take advantage of the Stimulus Tax Credit

Be sure to close the escrow on your new home no later than November 30, 2009 to qualify for the New Home Buyer Tax Credit.  Consult your tax professional for additional details.

Do research the neighborhood.

Look at the house, but also look at the neighborhood. Location is the most important thing, so it’s critical to look at more than bricks and mortar.

How can you choose the right community? Become a neighborhood detective. Figure out what you’re looking for, do research and find a neighborhood that fits your description.

Do look at several houses before you buy.

Buying the first house you look at it is kind of like marrying the first person you go on a date with — not necessarily a good idea. If you buy a home without comparing it to other listings in the area, you’re likely to overpay or miss out on a great nearby home. Walk through at least three homes before you choose. If you still love the first one you saw, make an offer!

Do invest in a professional inspection.

While in the most part legislation and a good Buyer’s Agent will afford you protection, sellers don’t always disclose the whole truth to potential buyers, or they might have done a band-aid job to cover up issues until escrow closes. In fact, in an economy where sellers are frequently losing money on the sale of their home, maintenance on the property may have suffered.  The average home buyer takes 15 minutes or less to choose a home, but many potential problems, like plumbing and wiring trouble, might not be visible to the naked eye.

Home inspectors can look beyond the fresh coat of paint to find costly underlying problems. Splurge on an experienced professional — it will save you time, money and house-induced heartache later on. Make sure your Realtor® assists you in obtaining a qualified local professional.

Do buy based on needs, not wants, and plan for the long haul.

The average Americas lives in the same home for about 9 years, so it’s crucial that you think about your long-term needs when buying a home. A 2-bedroom house with a gourmet kitchen may dazzle you today, but will you still be enamored down the road when your family starts to grow? Make a list of your needs and stick to it to avoid buyer’s remorse down the road.

Foreclosures, REO’s and Auctions present real opportunity

Foreclosures, auctions and REO’s are still widely available (see the state by state list here) and can be real values.  Start by doing your homework; read my Guide to Understanding Short Sale/ Foreclosure Real Estate.  Then follow my 10 Crucial Steps to Short Sale Buying.  And be sure to select a Buyer’s Agent who is a Certified Short Sale Professional.

While it’s possible to get a deal on your dream home at the auction house, buying a home at auction isn’t always a bargain. The starting price may seem reasonable, but several bidders can force the price well over market value. Avoid overbidding by doing research. Are any outstanding property taxes or liens that you’d have to pay for upon purchase? What are comparable homes in the area selling for? Is the neighborhood on the way up or on the way out? Your Realtor® will help you make those assessments.  On auction day, set a strict budget and don’t let emotions take hold of your paddle in a bidding war.

Don’t buy a house for its decor.

A home might have gorgeous furnishings at the showing, especially if it is professionally staged, but it needs to accommodate your furnishings and lifestyle after the sellers pack up their sofa. Look past a home’s decor and make sure the space will accommodate your lifestyle and furnishings.

Are the spaces functional and efficient for your daily routine? You might love how a seller has transformed an extra bedroom into a crafting space, but will it be big enough for your twins’ bunk beds? Focus on the floor plan and the square footage to decide if a home is right for you.

Don’t buy the most expensive house on the block.

Keep up with the Joneses, but don’t outdo them. You won’t get the same return on investment with the biggest, on most improved, house on the block, and you might have trouble selling later on.

Before you purchase a home, research the neighborhood. Is the house you’re considering overbuilt for the area? Are comparable homes selling in the area? You’ll be glad you gathered the information if you ever decide to sell.