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The bleeding in the housing market seems to be slowing, at least temporarily, according to home price data released recently.
Most U.S. cities saw gains in the median price of single-family homes sold during the three months ended Sept. 30, according to the National Association of Realtors' quarterly report on home prices. This is the second consecutive quarter of gains.
NAR attributed much of the recent increase in home prices to the government's first-time homebuyer tax credit, which has helped revive home sales from a deep slump.
The national median home price was $177,900 in the third quarter, up $7,000 from the previous quarter. And while that down more than 11% from the third quarter of 2008, the pace of decline is slowing. In the second quarter of 2009, home prices fell 15.4% from the same period last year.
Despite the positive report, many clouds dot the housing market horizon. The darkest of those is the current employment picture. The latest release from the Bureau of Labor Statistics reported a national unemployment rate of 10.2%.
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After three years of slumping house prices, the end of the real estate bust may finally be in sight. Home sales are rising, inventories are shrinking, and most economists believe values nationwide will hit bottom in the second half of 2010 — but not before falling another 5% to 10% first.
One positive byproduct of the 30% plunge in prices since the 2006 peak: Houses are now more affordable than at any time in the past two decades, according to the National Association of Home Builders — good news for anyone looking to buy.
If you hope to sell your home or rebuild lost equity, there's new hope. One plus is that Congress has recently extended the first-time homebuyer credit, and even expanded it to include those with higher incomes and current homeowners.
If you're thinking of selling your home, if at all possible, postpone those plans. Sellers next year will be unloading property at what's likely to be the very bottom. Ouch. Hold out for a few more years, so you'll compete against fewer foreclosures, increasing the chances your home will fetch a higher price.
Delaying your sale isn't an option? Act fast before prices drop further. To expedite a sale, don't try to compete on price with foreclosures and short sales (when the bank allows owners to sell for less than they owe on their mortgage); most of the time, you can't win. Instead play up your home's strengths. Foreclosures typically need a lot of work, and short sales can take months. So make necessary repairs, throw in a paint job and new carpeting since buyers may be short on cash after the down payment, and offer a fast and flexible closing date. That will attract people willing to pay more for a home that's in move-in condition and a deal they can close quickly.
As for fixing up the place, now's not the time to spend serious money; since prices aren't likely to snap back soon, you won't see much of a return on your investment. Focus on lower-cost cosmetic fixes, like painting and landscaping, and basic projects that improve functionality and design, such as adding molding or doing a basic bathroom remodel.
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Smart Money lists ten mistakes first-time home buyers make as follows:
1. Not knowing how much house you can afford.
2. Assuming foreclosures are great deals.
3. Letting your true feelings show.
4. Failing to find a good buyer's agent.
5. Underestimating the costs of owning a home.
6. Failing to budget for property taxes.
7. Assuming your first offer will get accepted.
8. Skipping the inspection.
9. Doing too much too fast.
10. Failing to include a contingency clause in the contract.
Here's our take on each of these:
1. Don't let a bank tell you how much you should borrow. Figure out what you can afford (including your down payment) and get a home in that price range. Then again, others think you should buy more house than you need. We MAY agree with this — as long as it's not more house than you can AFFORD.
2. Foreclosures can be good deals, but they also often come with a lot of baggage (like the homeowners trashing it before they left.) Just go in with your eyes wide open and expecting there to be "surprises" and you'll be prepared to potentially by a foreclosure.
3. Never let your true feelings show. Even tell your kids (if you have them) not to comment on a home when they go in with you. They can say whatever they want to to you once you're back in the car, but while we're in the house, they aren't to comment good or bad on the place. (Yes, buying a house is a HUGE game, unfortunately.)
4. Having a bad agent can be a real drain on you in many ways — physically, emotionally, financially, etc. Thankfully, there are ways to pick a good realtor.
5. There are all sorts of costs in buying a home. General maintenance goes without saying, but also consider the one-time costs of painting, carpeting, new furniture, etc. that you'll need to buy if you get a new home.
6. Real estate taxes go up, but hardly ever go down (at least much), even in this economy.
7. You NEVER want the first offer accepted.
8. You're going to buy something for a few hundred thousand dollars (most likely). Don't you think it's worth it to pay $400 or so to see if it's in good shape? Money well-spent!
9. Goes along with #5. Not only do you need to budget for everything, but don't worry about doing it all within a month or two of moving in. Plan for a six to twelve month time period before getting fully settled.
10. Good thing we had a contingency clause in one of our most recent deals or our buyer would have been stuck with a major problem.
Talk to us about these and other mistakes home buyers make. We're here to help!
Lessons every landlord needs to know…
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