home ownership

With record home foreclosures and a less than stable market, potential home buyers are jittery, to say the least. The real question is if their fears are legitimate. Surprisingly the answer is maybe not. A close look at the housing market reveals several factors that favor home buyers, first time buyers and home owners who want to move up.





Any discussion of the housing market requires acknowledging up front that there continues to be serious market weaknesses. Foreclosures have not yet peaked, according to a variety of sources from housing market analysts to the Treasury department. Home prices are also moving down rather than up. In California, one of the major state markets, home prices have declined by as much as 41 percent over the past year. And loan requirements have tightened considerably. That is the bad news.





The good news is the other side of the coin. For first time buyers and those who want to move up, lower home prices means that home affordability is extremely high. For the first time in many years, home buyers can get much more for their dollars. For qualified buyers the home of their dreams can be a reality.





First time qualified buyers are also eligible for FHA loans with only 3 percent down. Moreover the down payment can be gifted. And to sweeten the deal even more, the federal government is offering $7,500 tax rebate loan to home buyers. To be sure, this is not a gift. The rebate will have to be paid back over a period of time. But the $7,500 is interest free. Interest does not accrue even when the loan repayment kicks in. Finally regarding FHA loans, the borrowing limit has been increased. Even with a small three percent down payment (three and a half starting next year) FHA loans can go as high as $400,000.





Interest rates for home buyers are still relatively low and are likely to remain so for a while. A fixed rate low interest mortgage as opposed to a balloon mortgage or a moveable rate mortgage takes a lot of the guess work out of home ownership. For home buyers who anticipate living in their new home indefinitely this certainty can offset a less than robust equity buildup. In other words the pendulum always swings back. But without the pressure of having to sell in a buyer's market, short-term fluctuations will have much less effect on home buyers. It is also worth noting that historically home owner equity has outperformed stocks. The return on investment for homeowners is a better deal than buying stocks.





There is another factor that should be taken into account. New home builders do not want to be sitting on homes that are not selling. It is an expensive proposition for them. For home buyers in today's market there are perks available that shouldn't be overlooked. For one thing, builders are lowering their prices just like everyone else. It's a buyer's market for them too. Getting in and out as quickly as possible is the builders goal. The longer they have to hold on to a new home, the less their profit margin will be. There are also some favorable tax benefits that accrue to builders if they have to lower their prices to sell homes. It's an indirect plus for the home buyer.





Many builders are also willing to pay the loan fees for home buyers. It's another attractive plus for home buyers. Not all builders are willing to go that far, but the leverage is with the home buyer. Savvy realtors have that on their check list of negotiable items to be pursued on behalf of their clients.





Last but by far not least is the upgrade factor that builders may be willing to include. Many builders go upscale in their model homes as a selling point and include custom cabinetry, high quality carpeting, top of the line appliances and gourmet kitchens. Any and all of these upgraded features go a long way as selling points for builders. It's the "aaah factor" that can often sell potential buyers. Builders are much more willing and likely to negotiate upgraded features if it means quickly selling a property. It's another instance of home buyers getting much more for their dollars than they would in a seller's market.





All of these reasons add up if you are considering buying a home. Even with the economy and the housing market in flux, this may be the perfect time to buy a home. It's hard to say with certainty how much lower housing prices will decline. The downward trend does seem to be slowing. Whether home prices continue to go down or begin to climb back up, this may well be the best of times for home buyers.

Kevin Curtis is a licensed agent with RE/MAX Advantage Plus. He is The Minnesota Real Estate Team's 2007 Agent of the Year. Kevin and his team provide great service and ongoing insights into the Minnesota Real Estate market at
MinnesotaPropertiesOnline.com.

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