Due to the economic climate, the process of buying homes has never been easier in the US. But, these conditions also call for a number of checks and balances before you take the plunge.
Below are some home buyer tips that will help you examine some of the grey areas from a different perspective. But first, we will examine the housing climate and how it got to its current state.
For long, average homeowners lived within their comfort zone, confident income levels would continue to rise and therefore the median home prices would rise respectively. Investment in a home was thus considered an appreciating asset. There was absolutely nothing wrong with the assumption, as housing used to be a reliable investment.
However, when tables started to turn in 2007, the circumstances changed dramatically and the economic melt down acted as the last straw on the camel’s back for the housing industry. Suddenly home prices started dropping and there were far too many homes put on sale. The mortgage crisis added further dimensions with a series of foreclosure homes across the nation. Together, home buying failed to qualify as an investment into a perpetually appreciating asset. Sellers became desperate and buyers became indecisive or cautious. Nevertheless, buying a home has always been part of the American dream. So, how do you buy your home, factoring in the new challenges involved? Here are some tips to help you optimistic throughout your journey.
The best home in a given neighborhood may not offer the ‘best buy’ for you. Consider examining several homes in the immediate neighborhood. If the neighborhood is a major concern, try to find a middle ground. It is always better to buy a home that you know you can afford, versus struggling to make ends meet every month.
Living in a gated community may be your dream, but it could be one that’s far out of reach. Homes in such a location provide a great family living environment, however it usually comes with a hefty price. While choosing a luxurious home may seem like a great deal, due to the housing climate, there are other factors to consider.
Aside from the mortgage, there are other factors associated to the price of your home. For example, property taxes, municipal taxes, appreciation and depreciation, etc. While you might be able to make ends meet to pay off your mortgage, other bills will start to pile in. You have to remember to include property taxes into your decision and make sure the house is really an asset that you can afford.
Performance of the local economy, new investments, increased manufacturing activity, and improvement in quality of life are among the major drivers that will help home prices move up in any city. Factor in the employment numbers – are those numbers on a growth trajectory or do you see a deep dip coming over the next couple of years? More employment opportunities potentially means more homes and if the reverse happens, your home prices can potentially drop, as well. Visible examples of this are the Boston, Massachusetts and Detroit, Michigan markets. Indeed, it is difficult to forecast macroeconomic conditions over a 10 year span. But, it helps to be on the cautious side when your finances are at stake.
Your home should remain within a safe distance for your daily commute. Keep in mind that you will have to commute, in order to pay for that mortgage! However with soaring oil prices, it seems like your paycheck is constantly being siphoned into your car. Buy a home that’s within a reasonable distance from work, so you don’t have to dump your paycheck just to drive back and forth to work.
Though many economists are forecasting a resurgence in the housing market, we are still in a ‘buyer’s market’. Understanding the particular market in which your perspective home is in, can help you make a better informed decision when it comes down to buying. Incorporating factors such as your daily commute, local taxes, and the economic climate of your community, along side the global economy, can also assist you in making a more informative decision.
