Blog Post

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.
When the market starts improving, your negotiating power starts to diminish. As with right now you can ask for price reductions, improvements, closing costs -- whatever -- and the seller, desperately trying to get a contract, is very likely to work with you. Once a few people get off the fence, there's safety in numbers and you lose your leverage.

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.

   John and Julie Chilman, for example, recently have been able to stretch their dollars in the Las Vegas area. The listing price for the five-bedroom home they're buying was $265,000; they offered $250,000.

   "Our Realtor was like 'Yeah, pipe dream. Like they're going to take that,'" John Chilman said. "And all they did was counter $255,000... and they're paying all closing costs." The home had lingered on the market, and was listed for $310,000 just six months ago, he said.

   According to data from earlier this month, prices had fallen 50.7% in Las Vegas from their peak and were about where they were in the second quarter of 2002, according to data from Clear Capital, a real estate valuation and data provider for banks and investment firms.

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. However, it's nearly impossible to time the exact bottom of the housing market and even if you do there's no guarantee you'll make a killing. As the country crawls out of a recession, many markets probably won't see huge home-price gains any time soon.

3. Builders are offering big discounts:

   Home builders are getting even more aggressive with their pricing.
   Start 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. Builders want to save their credit, save their brand, save their reputation and clear out inventory.

   Walk in with a preapproval for a mortgage, make an offer, then walk away without making a deal if you have to. Chances are, a builder will call back and reconsider that offer rather than let a potential buyer get away.

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 $729,750 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. This week, the 30-year fixed-rate mortgage averaged 5.07%, according to Freddie Mac's weekly mortgage survey. But low rates don't mean lenders are handing out mortgages easily. You'll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those rates.

5. You can get a federal tax credit:

   There's now a federal credit of up to $8,000 for home buyers who haven't owned a home in at least three years. Unlike the previous credit, this is money that doesn't have to be paid back. That extra cash will come in handy: The average first-time home buyer spends about $6,000 in the first six months of owning a home.

   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.

Article:
Amy Hoak is a MarketWatch reporter based in Chicago.
http://www.marketwatch.com/news/story/five-reasons-buying-house-now/story.aspx?guid=%7B01DA1B93%2D91D1%2D49E4%2DA1B1%2D0ACA9CE66FF4%7D&siteid=nwhfriend

Posted 18th March 2009 by Sally Forster Jones