By Kevin M

Ominous question, isn’t it? There are all kinds of implications that go with that possibility, and none of them fit neatly within the economic progression of the past 30-40 years when it seemed the entire economy was running largely on the back of the real estate industry. But whether we like it or not, new trends in housing are beginning to emerge, pointing to a future that will likely see more renters—maybe far more—than in the recent past.

Though new construction of residential real estate has been showing definite signs of an upswing in the past few months, the encouraging statistics are far more important for what they hide.

An article last week, Rent Party! Apartments Drive Strong Housing Starts Data (Yahoo!Finance) reports a good news/bad news scenario on new residential construction. The good news: November housing starts are up 9.3% from October, and 24.3% over October, 2010. That’s an impressive turn-around.

But now the not-so-good news: though overall housing starts are up impressively, the stats for 1-4 family homes is actually down, dropping 1.5% from October, 2011.

So if home building is down from last year, what accounts for the increase in new construction? Apartments! Apartment construction (buildings with five or more housing units) are booming while construction of primarily owner occupied single- and small mutli-family homes are stuck at a recession level pace.

The economic implications of this shift are not lost on builders who are moving from the once reliable single family market to apartment construction. They’re on the front lines of the housing market, they see future, and they’re building to prepare for it. Obviously, they see the shift as part of a longer term trend.

The forces driving the rental market

The shift is being driven by a number of factors that insure it will continue for many years, among them:

1. The foreclosure wave of the past 4-5 years is turning one-time owners into renters
2. A stubbornly soft employment picture that shows few signs of significant improvement
3. Lack of savings for down payments
4. Excessive debt levels
5. Tighter mortgage lending standards in the face of weak employment, low savings and high debt
6. Flat or declining house prices have removed the imperative to own
7. A reduction in new household formations, being driven by all of the above

The combination of these economic forces means that renting may become the New Normal for many middle class households.

How could this affect your own housing situation?

OK, we’ve listed macro-economic factors why renting is becoming more popular, but how does that work out on a personal level? If you’re tossing around the own-vs-rent question, why might you be better off renting? Let’s consider the above factors in light of personal circumstances.

Employment. This is a double-edge issue for most people. Not only can weak employment increase the possibility of losing your job, but finding a new one might require moving to a different city or state. How easy will that be to accomplish if you have a house that will need to be sold? Bigger picture though, how much sense does it make to sign onto a 30 year mortgage given that the typical job lasts only from 1-5 years? As a renter, you’ll have greater employment mobility, should that become necessary, and you can more easily move to a less expensive place in the event of an income drop.

Savings and debt. Since it’s no longer possible to flip houses every few years, you’ll have to live in your home much longer, and that will mean repairs—big ones as the home ages. Home repairs now cost well in the thousands, and often tens of thousands of dollars. If soft house prices mean you can no longer take a home equity line to make major repairs, then your house might eat up your savings and force you to tap credit cards.

Flat/declining house prices. Rising house prices have been the ultimate (but generally unspoken) lifeblood of the housing market. Not only has it dangled the possibility of easy riches for ordinary people, but it also morphed into the classic buy-now-and-beat-the-price-increase marketing strategy. It’s disappearance from the housing scene has a greater impact than is generally assumed.

Even if rising property values aren’t your primary motivation for buying a home, their absence will affect your investment for years to come, and maybe even forever. Let’s face it, from the 1970s through about 2006, millions of people did buy primarily for rising values. They were a significant force in the market, and their sudden disappearance means housing is no longer either a guaranteed investment nor even necessarily very liquid.

Foreclosures, tighter lending standards and slower new household formations. Even if you have no trouble qualifying for a mortgage for the home you want to buy, the fact that fewer prospective homebuyers can get a mortgage will impact your housing investment. Fewer qualified buyers means a smaller market for homes in general, and that will translate to slower/flat/declining price trends. Not only will your home be worth less in the future, but there will be fewer prospects to sell it to should selling become necessary.

Why should we think the shift to rental housing is in any way permanent?

Of course, none of us have a crystal ball, but I think it’s pretty safe to assume that the shift to rentals will continue for the foreseeable future. It’s not a fad, but a reaction to all of the economic forces we’ve covered so far, none of which are likely to reverse any time soon.

The weak employment front is being caused by long-term fundamental shifts, such as the off-shoring of jobs to lower wage countries, and the relentless advance of technologies that are reducing some fields and eliminating others completely. Meanwhile, it seems clear that low mortgage rates—the usual solution to a bad housing market—are having no affect at all.

In addition, we have to consider the very real possibility that future recoveries may look very different than they have in the past. Not only is it likely that recoveries won’t be real estate driven, but they may not benefit housing in any meaningful way either. The Baby Boom generation—the largest single generation in history—has moved past the prime home buying years, and many are now looking to downsize. Combining this with economic factors has the weak housing market looking, smelling and acting permanent.

Why we might not become a nation of renters

Part of the difficulty with home ownership right now is that real estate was at the center of the financial meltdown, and that situation is still actively playing out. While it does, renting is looking better all the time, if for no other reason than that flexibility is a huge advantage during a time of major change, and that’s exactly what we’re in.

None of this means that owning a home will have no value in the future, but how and when a home is bought will be the determining factor. If house prices continue to decline, eventually the cost of owning a home will drop down to a level where it will be competitive with renting, and maybe even cheaper. That will be the point where we’ll start to see a real recovery in housing.

Here in Atlanta where I live, new subdivisions that were priced in the $600,000-plus range five years ago are now advertising base prices of $350,000. The homes are selling at the lower prices! As price drops (to more realistic levels) move through the market, housing will finally stabilize. That won’t happen quickly or easily though, because many millions of owners of existing homes are still carrying the large mortgages that were based on much higher values. The ride down will be slow and painful, just as it’s been so far.

While that’s taking place, renting a home is increasingly looking to be the housing arrangement of choice. The building industry is betting their bankrolls it will continue.

What do you think about renting? Is it a viable alternative in the current economy?

Related Posts:

8 Ways to Buy Your House for Less
How to Get a Real Deal on Your Next Home
A View From the Economic Cliff
5 Reasons to Buy LESS House Than You Can Afford
What Would You Advise a Friend Facing Foreclosure?
Why Time is Your Friend When Buying a House

Guest Post

The criteria for refinancing a mortgage through a traditional lender typically require some degree of equity in the property. At the very least, homeowners should not owe more than the home’s value in order to qualify for the best refinance rates.

After the housing market crashed in 2008-09, many homeowners found themselves struggling to refinance their mortgages in light of sinking home values and disappearing equity. However, there is hope for refinancing even for borrowers underwater with their current mortgage.

Home Affordable Refinance Program

The Home Affordable Refinance Program, better known as HARP, was designed to help homeowners refinance their homes with stable, affordable mortgage terms. A joint effort by the Department of the Treasury and HUD, the HARP concept was designed to address the problem of lost home value compared to mortgage balance owed.

Certain criteria are required in order for a borrower to qualify for a HARP loan. Primarily, borrowers must be current on all mortgage payments, with no more than one late payment in the previous 12 months. Additionally, the loan must be owned by Freddie Mac or Fannie Mae. Initially, the ratio of loan to home value had to meet qualifying criteria, but those standards were changed in 2011.

Individual lenders are responsible for processing and approving applications. Not all mortgage servicing companies make HARP available, as involvement with Freddie Mac or Fannie Mae is required. If available through a lender, refinancing under HARP does require the origination of a new loan, with all the subsequent fees and underwriting requirements typical of a refinance. The program does not guarantee the best refinance rates, but instead strives to help homeowners refinance into a more affordable payment and interest rate.

FHA Streamline Refinance Program

Whether a borrower qualifies for HARP or not, there are options available for refinancing, even when the value of the home has dropped. For example, borrowers with The Federal Housing Administration (FHA) mortgages may be eligible for streamline refinancing. Like HARP, the FHA Streamline Refinance program may not offer the best refinance rates, depending on the borrower’s credit history and income, but the program does help homeowners who are under water with their mortgages.

Various criteria and terms are available through FHA lenders provided the mortgage is current, the loan is insured through FHA, the refinance lowers monthly payments and no equity is cashed out. As with HARP loans, loans eligible for FHA streamline refinancing vary, depending on specific lender terms. Some borrowers may qualify for no-cost refinancing with a higher interest rate. Others may have their closing costs rolled into the new loan, to take advantage of lower rates.

Individual Lender Refinance Programs

For homeowners whose loans are not owned by Freddie Mac, Fannie Mae or FHA, many individual lenders offer programs to help refinance underwater mortgages. No matter what lender owns the mortgage note, borrowers should start the refinance process by first asking their current lender what programs the lender offers and for which programs the borrower qualifies. From there, the borrower can pursue other options to ensure the best refinance rates and terms for their situation.

This post is brought to you by Refinance Mortgage Rates, a consumer organization with the mission of educating and informing in a time of economic uncertainty. We publish and spread accurate content to help consumers avoid the pitfalls of the mortgage and real estate market.

Related Posts:

Save for Retirement Now or Payoff Your Mortgage First?
Five Reasons the 30 Year Mortgage Beats the 15
Why Paying Down Your Mortgage is More Important Than Ever
Is Now a Good Time to Refinance?
Adjustable Rate Mortgages – You’re Kidding, Right?
5 Reasons to Buy LESS House Than You Can Afford

By Kevin M

For generations the conventional wisdom on housing was always to buy the most (or more) house that you can afford. The rationale—which worked for decades—was that a house was the closest thing to a guaranteed investment, and by buying the most expensive property you could afford you were insuring the greatest possible payoff over the long run.

That thinking caused many households to go deep into debt in order to make it happen, which created a vicious circle of greater debt feeding higher property prices.

What a difference a few years can make?

The entire conundrum went full circle, with property prices rising consistent with higher mortgage levels, until the borrowing party stopped. Suddenly John and Jane Q. Homeowner could afford to borrow no more, and the whole property construct has gone into the ditch.

Will we get out of that ditch anytime soon? Maybe…but maybe not, at least not for a long time.

Rather than speculating as to when the long awaited turnaround will occur, it might be better to plant our feet firmly in the ground that is now, accept our new reality and make adjustments in our housing expectations that are consistent with that reality.

Now is the time to reverse the psychology that drove both property prices and debt to dizzying levels and adopt a new strategy: buy LESS house than you can afford! Why?

There is no job or career stability

Despite the plethora of no doc and no income verification loans, the fortunes of the housing market have always rested squarely on employment. Since most properties are acquired primarily through debt, employment and career stability have always been the unseen foundation beneath property prices.

Whether through technology or off-shoring of jobs to countries with lower wages, the trend in business is now the reduction in both staffing and payroll levels. This trend has been at work for many years and shows no sign of reversing.

Meanwhile jobs and careers that were once thought to be safe are no longer, and those considered secure today have little in the way of long term certainty. It’s critical then for homebuyers to buy with the assumption that their incomes could be lower in the future than they are at the time of purchase.

We can no longer assume property values will rise

If house prices have always been based on employment, then mortgage lending has always been based on house prices. Rising prices not only meant higher mortgage loan amounts, but they also functioned as a borrower fail safe: if you could no longer afford to make the mortgage payments you could usually sell the property for more than you paid for it.

The mortgage would be paid and you’d walk away with a cash windfall, free to go on and make your next move in life. It was a cozy arrangement while it lasted.

But property values in much of the US, the UK and Europe have fallen, often substantially, and continue to do so to varying degrees. This means no more borrower fail safe—rising property values can no longer be counted on to solve mortgage problems. It may be critical that you buy a property for even less than current market value.

Selling a property is neither certain nor inexpensive

The same factors that are lowering house prices are also making them difficult to sell. Mortgage lenders, stung by the wave of foreclosures that seems to have no end, have tightened lending standards. Fewer people now qualify for mortgages, and that reduces the pool of potential buyers.

There’s also the issue of cost. Trying to sell a house in a buyers market is not only more difficult, it’s also more expensive. In a strong market you might be able to sell your property without a real estate agent; in this market you almost have to have one, and that mean’s you’ll pay a commission. It may also mean you’ll need to pay part or all of the buyer’s settlement costs, another sales expense that may not have existed in better times.

The time and expense needed to sell a property might make doing so impractical. Be sure to consider this fact when buying a new home.

Non-mortgage housing costs are rising

One of the best features of a mortgage—if it’s a fixed rate—is that your payment is locked in at purchase and can never rise. But that can’t be said of other housing expenses. With local governments facing budget shortfalls, property taxes are rising. Homeowner’s insurance premiums are also rising, and utility costs are bouncing all around with the rise and fall of oil prices. Repair and maintenance costs are also increasing now that people are forced to stay in their homes longer than in the past.

The only control a homeowner or buyer has over their housing expenses is with the mortgage itself. For this reason, it’s vitally important to make the best deal on a mortgage that you can. Loan rates and fees vary from lender to lender, and having a reliable e-mortgage calculator is the first step toward getting the best deal on a mortgage.

You may actually have to pay off your mortgage!

Leverage has been a central component in the real estate market for a very long time, so much that few people questioned its use until the current housing collapse. The idea was to put as little money down as possible, maximize the mortgage financing, and keep rolling the loan over every few years, either to get cash out or consolidate debt. If we’re honest, paying off a mortgage was never the goal—that has a lot to do with the mess we’re in now.

But today is a new day, and the game has changed. In the housing and mortgage environment we’re in now, and will be for the foreseeable future, you need to have a concrete intention and plan for paying off your mortgage! Again, this will mean getting the most favorable mortgage terms possible. Use an emortgage calculator, investigate as many lenders as possible, and be sure to get the best deal available.

Do you think the real estate market will improve soon? If not, what advice can you offer that will help both homeowners and buyers cope with a weakened market?

Related Posts:

Five Reasons the 30 Year Mortgage Beats the 15
Save for Retirement Now OR Payoff Your Mortgage First?
Why Paying Down Your Mortgage is More Important than Ever
Is Now a Good Time to Refinance?
What Would You Advise a Friend Facing Foreclosure?
Want to Save Thousands on Your Mortgage? Fix Your Credit

By Kevin M

If you’ve spent much time on this site, you know that I’ve taken aim at the assumption that homeownership is good for everyone. It’s not that I think owning a home is bad, but more that I don’t think it’s right for everyone. In addition, I think that the advancement of- and unquestioned belief in- universal homeownership was one of the root causes of the real estate and mortgage meltdown.

Today I’d like to zero in on homeownership as it relates to retirees, and by extension, to retirement planning. I’m going to risk committing a heresy to make the case that many would be better off renting in retirement.

Why might some retirees be better off renting?

Carrying a mortgage into retirement

The conventional wisdom is that you should have a home of your own and no mortgage on it when you retire–so far, so good. But what if your house won’t be paid off before retirement? Or what if you’re already retired and you still have a mortgage?

For many people, that’s the reality. More than half of retirees were carrying mortgage debt in 2009, which was double the percentage just two years earlier. Apparently a generation raised with debt as a traveling companion doesn’t feel compelled to eliminate it in retirement as previous waves of retirees have.

For the vast majority of people, being able to retire at all will require a reduction in living expenses; since a mortgage is typically the single largest expense, carrying it into retirement will be like dragging an anchor from the past.

It begs the question: what’s the difference between paying a mortgage, and paying rent? I’d argue that the answer is “not much”. When you’re a tenant, you pay rent that enables you to live in the property. When you pay a mortgage, you pay “rent”—a.k.a., interest—on the money you owe that enables you to live in the property.

So if it’s a wash whether you rent or own with a mortgage, why not own? Read on.

The tax benefits of home ownership may evaporate

Tax breaks are one of the major reasons driving people to own homes, but for many seniors that benefit diminishes or even disappears completely. Since the income tax is progressive (tax rates rise with higher income) the homeowner benefit declines with the lower income that retirement usually brings.

Not only is income usually lower, but some of it also escapes taxation altogether. Social Security income, for example, is only partially taxable for federal taxes while states exempt it completely. And most states offer generous income exclusions for retirees. Here in Georgia, seniors get a $35,000 exemption for “other retirement income”—and that’s per person.

Lower income/less taxable income means less homeownership tax benefit. For many retirees, there will be no more tax benefit to owning than with renting.

A renter doesn’t have to worry about repairs and maintenance

If you rent, you don’t have to make repairs. New roof–$5000, $7000, $10,000—not your problem. New furnace—$5000, $7000, $10,000—again, not your problem. These expenses, often completely ignored in the homeownership equation, can be a budget buster for retirees on a fixed income.

And how about maintenance? Maintaining the lawn, trimming hedges, raking leaves, shoveling snow—the homeowner has all of these responsibilities, the renter has none. For the retiree, or the person planning for retirement, these are more than just minor ongoing responsibilities.

Who will maintain your property if you’re unable to? Many retirees like to travel; and as much as we may not want to think about this, many have or will develop health issues that will make routine maintenance undesirable or even impossible. Now you’re looking at paying someone else to do what you can’t, and another expense is added to the budget. A retiree who rents doesn’t have this issue.

Even if you have no mortgage, you’re never really “rent free”

It’s sometimes said that people who have paid off their homes live “rent free”, but as popular as that notion may be, is it even true?

Not entirely—and maybe not at all.

We’ve already discussed repairs and maintenance as an ongoing cost of owning a home, but you’ll also have real estate taxes, homeowners insurance and possibly home owner’s association dues. In some areas of the country, real estate taxes have gotten so high that the monthly expense comes close to what it would cost to rent an apartment. None of these expenses will disappear because you paid off your mortgage.

The idea that you’ll ever truly be rent free is virtually a myth, and we haven’t even gotten to another significant “expense” involved in homeownership that rarely gets much attention…

Opportunity cost

A house is a capital trap, and one that’s owned free and clear has even more money tied up in it. While not having a mortgage payment is a substantial advantage to a retiree, much of the benefit is lost when we consider what else could be done with the money if it weren’t tied up in the house, also known as the opportunity cost.

Earning income on the money to generate an additional cash flow is one opportunity cost. This a more obvious issue when interest rates are higher than they are now. Since interest rates on savings vehicles are at historic lows, it doesn’t seem to be much of a factor. But low interest rates have caused a real issue for retirees in this regard, creating a very real opportunity cost from another direction.

With interest rates on savings hovering in the low single digits, access to principal has become more important to retirees than the income it generates. It is for this reason that reverse mortgages have become so popular—people need the cash that’s tied up in their homes. And—ironically—how much of that cash is being borrowed out to maintain and make needed repairs to the home itself?

In a higher rate environment, a retiree could rely on the cash flow from the income on his investments—now he may need to draw down the investment itself to survive.

Is renting in retirement right for YOU?

Is renting the better option for all retirees? No, not for all—but then neither is homeownership. Each retiree, or perspective retiree, has to consider his or her housing situation in light of personal circumstances, and not rely on general assumptions or on “conventional wisdom”.

When might you be better off renting than owning in retirement?

1. If you have few investments apart from the equity in your home

2. If the necessity of taking a reverse mortgage is more than a remote possibility

3. If your current house payment—with or without a mortgage—is higher than prevailing rents in your area

4. If you’ll be carrying a mortgage into retirement that won’t be paid off any time soon

5. When there’s a distinct possibility that you may need to make a move shortly after retirement; this could be for health reasons, to follow your children, or because now that you’re retired you don’t want to live in any one place

6. When health problems or a desire to travel necessitate paying others to maintain your home

7. When selling your home will mean the difference between a comfortable retirement and a life of struggle

8. When you’re “over-housed”—the 4000 square foot home you raised your family in is three times more space than you need now and you’re tired of paying for what you aren’t using

9. When there’s so much equity in your home that freeing it up will open up some…exciting life opportunities

Consider which path is best for you in light of the above questions—you may be surprised to find that renting is the better opportunity for you in your retirement years.

Fortunately the tax code offers favorable treatment if you want to sell your house and cash out. The IRS allows a one time exclusion from tax on the gain on the sale of your primary residence of up to $250,000 ($500,000 if married, filing joint) that will enable most people to liquidate their homes with little or no tax consequences.

Have you ever considered renting as part of your retirement strategy? Do you see any downsides? Are there other reasons to rent that I haven’t listed?

Related Posts:

Preparing for SEMI-Retirement

Will Social Security Be There When You Retire?

Over 50 – No Pension, No 401K – What Now?

Save for Retirement Now or Payoff Your Mortgage First?

Good Retirement Planning Should Include a Low Cost/Debt Free Lifestyle

Will a Million Dollars Be Enough to Retire On?

By Kevin M

Housing prices are lower than they have been in years. Mortgage rates are near all time lows. Housing stats are starting to pick up. The bottom on the housing market is in. Joe Smith around the corner sold his house in three days, and he had four offers (or was it four days with three offers?). Time to buy—and buy quickly! Prices will never be this low—rates will never be this low—the real estate agent said so. Buy, buy, buy!

We’re starting to hear this kind of buzz. If you’re looking to buy a home are you starting to feel the pressure to make your move during this rare “window of opportunity”? Well, ignore the hype. The window will likely be open for a good while, so realize that time is your friend and play it for all it’s worth.

For one thing, housing sales continue to be weak. The statistical improvement we’re seeing in most markets is mostly upward bumps off a very low bottom.

More important, the profile of the typical buyer is deeply impaired. Three factors are combining that will keep a lid on the size of the potential buyer market for home for the next several years.

Credit

Credit guidelines have tightened since the housing crash. Certain programs, like sub-prime loans, no longer exist and credit requirements for nearly all programs have been stiffened. But that’s only half the problem.

The other half—probably the more significant one—is that credit profiles have deteriorated during and since the crash. Millions of people have experienced bankruptcies, foreclosures and prolonged periods of unemployment that have wreaked havoc with their credit profiles.

It’s important to realize that not nearly all of these people are “deadbeats”—many had sterling credit before the crash and had no problem getting loans of any sort.

The problem here is that these same people—who comprised a large chunk of the home buying market a few years ago—have been effectively removed from the pool of potential buyers. A bankruptcy, foreclosure or just a period of poor credit can keep a person from getting a mortgage for several years.

Equity and assets

Real estate equity has always played a big role in the housing market. In order to buy one home, buyers often need to sell their current one in order to come up with the down payment on the new one. If a homeowner has little or no equity there may be no money to make that down payment.

If the homeowner has negative equity—also known as “underwater” mortgages—he may need to come up with cash just to close out the mortgage on his current home in addition to funds for the down payment on the new one. And the number of underwater mortgages is at record levels.

Meanwhile, an industry shift has made this situation significantly worse. No down payment loans, which were extremely popular during the boom years, are now all but gone.

Multiply little equity, no equity and negative equity positions by millions of homeowners and you have millions more potential buyers excluded from the market.

Income and employment

Just as with credit guidelines, we have an unfortunate intersection of tighter mortgage underwriting guidelines with unfortunate economic conditions.

Income and employment guidelines for mortgage buyers—which were largely ignored by lenders prior to the meltdown—are now being enforced. And no income verification loans, which represented a disturbingly high percentage of all mortgages just before the housing crash, no longer exist.

At the same time, small businesses have closed and many millions of people have faced prolonged periods of unemployment and under-employment. Far fewer potential home buyers can meet the industry requirement for income and employment stability.

If you’re looking to buy, you have plenty of time

Combine all three of the above factors, and we have a real estate market where the pool of potential buyers has shrunk by many millions. That virtually guarantees that the real estate market will be soft for the foreseeable future—and if you’re in the market to buy in home, that’s good news for you. But in order to make that work in your favor you need to avoid the growing chorus of buy-now-and-beat-the-price-increase.

1. Keep your realtor on a short leash. Real estate agents are commissioned sales people—it’s their job to create a sense of urgency. The better they are at it, the bigger their paychecks. Tap their expertise, but don’t give into artificial deadlines.
    

2. It’s a buyers market, and you’re a buyer. Simply put, you’re in the drivers seat, not the seller.
    

3. Walk away from delusional sellers. It’s hard to believe that there are sellers who have completely missed the news on the state of the housing market, but there are. Either they believe that the home they’re selling is somehow special, or they’re too early in the process to realize that aren’t in control. What ever the cause, if it appears you’re dealing with such a seller, remove yourself from the negotiations.
    

4. Focus on properties that have been on the market for a few months. The difference between a delusional seller and desperate ones is often the amount of the time their property has been sitting on the market. For your purposes, the longer a house has up for sale the better the chance of getting a good deal. If a house has been for sale for more than six months, it’s likely that one or more offers on it have fallen through. That’s the best kind of seller to work with.
    

5. There’s always another property down the road. This is true even in normal markets, but in buyers markets that have lasted for years it’s even more so. Don’t fall in love with any single property. If the deal isn’t right, move on to the next one.
    

6. For all the above reasons, you must buy below market. Many people believe they’re getting a good deal on a home because they’re buying it for substantially less than what they would have paid at the top of the market. This is categorically untrue. You should look to pay less than current market values–that’s a good deal! Given the uncertain state of the real estate market, this will be your best defense against becoming another one of its casualties.

Don’t let anyone—not home sellers, real estate agents, news articles, expert pronouncements or even well meaning family and friends—convince you that you need to move quickly to get a good deal on a house. Quite the opposite. In this market, patience will get you a far better deal than urgency. So take your time and stay in control—you just might save tens of thousands of dollars.

Are you in the home buying market right now? Are you feeling the pressure to move quickly? What are your thoughts about that?

Related posts:

How to Get a Real Deal on Your Next Home

Eight Ways to Buy Your House For Less

Is the American Dream Dead Now That Housing is in the Tank?

Buying vs. Renting a Home – Its Not All About Money

2010 Was the Worst Year in Housing Ever—So Is Now the Time to Buy?

By Kevin M

By all accounts, 2010 was a terrible year in the housing market. How terrible? An article this week on Yahoo! Finance sums it all up in the headline: New-home sales in 2010 fall to lowest level in 47 years.

That’s almost half a century and longer than most Americans have been alive. But even that doesn’t quite capture the gravity of the situation. Apparently records tracking new home sales only go back to 1963! Or put another way, 2010 new home sales were the lowest on record! In reality, no one really has any idea how far back we’d have to look to find sales figures that low.

Another article on the same subject, released last week from Bloomberg gives some telling statistics: 1.28 million new homes were sold in 2005 (peak) versus 321,000 sold in 2010—that’s a 75% reduction in the number of new homes sold in a space of five years. In addition, we’ve experienced a 30% drop in house prices since the price peak in July of 2006.

The curious way news is reported

Now here’s something interesting about the two articles cited above: both have put a positive spin on those numbers!

The Yahoo piece centers on the fact that December sales were 17.5% higher than November’s, and that economists are predicting a solid rebound for 2011. The Bloomberg article has decided that the truly important story is that the largest builders are poised to grab an even bigger share of the market as sales improve going forward.

Talk about making lemonade out of lemons!

I’m certain that at least part of the reason for the upbeat tone has to do with the January Effect. January is the month that we put last year behind us and start fresh. Resolutions have been made, projections issued and budgets established and we’re never more confident on the success of any of them as we are at the beginning of a new year. As an example, the Dow finally crossed the 12,000 mark this week for the first time since 2008 when it was heading the other way.

Optimism is another factor. I think it’s the natural human state; no matter how bad things get, at least some part of us remains optimistic that it will all get better. And when things get as bad as they have in the housing market, it’s also natural to start to believe that things can only get better.

Why the euphoria on housing may be premature

It’s usually when a market deteriorates the way housing has in the past few years that I’m most optimistic about its future. Inventory is up, prices are down, interest rates are the lowest in history and the economy looks to have bottomed, at least for the near term.
At a minimum I think we’ve reached the point where there are deals to be had.

And yet there are nagging problems with housing that can’t be ignored. Consider the following…

Price/interest rate relationship. House prices have fallen significantly in an environment of record low interest rates—below 5% for a 30 year fixed rate loan for much of the past two years. At any other time in history, significant drops in mortgage rates would resuscitate housing in a matter of months. Something’s different this time.

This begs an obvious question: if low rates failed to lift the market, what affect will rising rates have? If we’re betting that rates remain low for the next couple of years, we’re also betting that the economy will remain weak. How will that support housing? This is an apparent conundrum and we’ll have to wait to see how it plays out.

Home ownership isn’t as tax friendly as it used to be. Income tax deductibility has always been a major driver for the housing market. But the tax benefits of homeownership aren’t what they used to be. Standard deductions have steadily risen over the past five years, while lower house prices and interest rates have shrunk the amount of mortgage interest likely to provide a tax deduction.

The standard deduction for married filing jointly is $11,400 for 2010; at that level, the tax benefit to many homeowners is limited. For some, there will be no deduction at all, since interest, taxes and other deductions will fall beneath the allowance.

Mortgages aren’t as easy to get. Mortgage financing remains much harder to get than it was at the peak of the market when house prices were soaring. No down payment loans are harder to find, while sub-prime mortgages, no doc and stated income loans are all history. All were major drivers of home sales. Unless we’re converting to a largely cash market it’s hard to see activity picking up significantly. Mortgage financing has always been the grease on the wheels of housing, and it remains impaired relative to where it was when the market was booming.

Lost equity.Finally, there’s a pronounced lack of home equity. A 30% decline in house prices has wiped out hundreds of billions of dollars in equity that would be necessary to enable current homeowners to tap by selling their homes to trade up to bigger, more expensive ones. In a nation of non-savers, it’s hard to see where the cash will come from for all those down payments.

How to avoid being a victim of a false start in housing

With all of those factors dragging on housing am I suggesting that you avoid buying a home in the near future? Not at all.

I’ve lived long enough to know that ominous adversities are often overcome by developing trends that have not yet been identified. A new technology could create fresh capital and millions of jobs; an economic or political collapse in a major country or region could send millions of people and billions of dollars flooding into the US; the DOW could race to over 20,000 in less than two years, creating a trickle down wealth effect into the housing market.

But until one of those events (or something similar) become obvious, it’s best to protect yourself and your money so that you don’t become a victim of a false start.

If you do want to buy a home, and think now is the time, consider the following as you do:

1. Buy less house than you can afford. The time horizons on homeownership are now significantly longer than they were a few years ago. The easier a house payment is to manage, the more staying power you’ll have for what ever the future holds.
2. Pay less than CURRENT market for what ever you buy. That will provide needed margin just in case prices aren’t done falling. (BTW, the fact that you can buy a house for less than it would have cost five years ago isn’t material—current market is all that matters, and you should buy below it in this environment.)
3. Have a workable plan to payoff your mortgage early. Refinance options are constrained and there’s no telling how long that situation will continue. If you follow the first recommendation, this will be much easier.
4. Make the biggest down payment you can afford without leaving yourself completely broke. If you can’t make more than a minimum down payment, it might be better to wait until you can. Take your time—there’s no rush to buy in this market.
5. Make sure you’ll have a cash cushion after you close on the home, and don’t spend it all on furniture afterwards! You probably won’t be able to rely on a home equity line to cover shortfalls and credit overall isn’t as generous as in the past. This is not a market where you want to be stretched thin!

The above suggestions should keep your financial ship afloat even if the housing market isn’t done falling—and I wouldn’t be 100% certain of that even if 1000 economists say otherwise.

What do you think? Is now a prime time to buy a house? Or do you think there’s still too much to be worked out in the market to take a chance? What suggestions would you make to a person looking to buy now?

Related posts:

How to Get a Real Deal on Your Next Home
Eight Ways to Buy Your House For Less
Is the American Dream Dead Now That Housing is in the Tank?
Buying vs. Renting a Home – Its Not All About Money

By Kevin M

Real estate has been the favorite whipping boy of the investment community for the past few years—heck, and most of the media too—but is it time to rethink that position? I’m not talking about the decision to buy a house as a primary residence—that’s a deeply personal decision based on your unique circumstances. No, I’m talking about real estate for investment.

A lot of people are nervous about real estate right now, and you can hardly blame them. Given the wild ride the housing market has been on for at least the past three years, this is hardly a time for unbridled optimism. Yet investing in real estate is probably a better bet than it’s been in decades.

Consider the following:

The speculation—and the high prices it caused—are gone

In many markets, house prices have come down so far that all of the speculation that caused the crash has been flushed out. The good news there is that future price declines may have been washed out of the system, lowering risk as it did.

It’s ironic that so many people were paying top dollar buying at the top of the market—and doing so confidently—and now that prices have collapsed, there are few buyers anywhere. The reality—that we now know to be true only in hindsight—is that high prices equal high risk. Much of that risk is now gone.

Cheaper than rent

House prices have fallen to a point where a typical monthly housing payment is lower than what you’d pay to rent an equivalent property. That means two things, and both are REALLY significant:

1. There’s a greater likelihood of buying property that can generate an immediate positive cash flow, and
2. When the typical rent exceeds the typical house payment in a given market, the situation is ripe for a surge in house prices as renters look to become owners.

From an investor’s standpoint, low prices mean rich buying opportunities. The most critical decision in any investment plan is buying smart—if you do, you lower risk and raise the likelihood of profit immensely.

When everyone is selling, it’s time to buy

The real estate market has had its purge, and the “blood is running in the streets”—which is usually considered the optimum time to buy—i.e., buy when everyone else is selling. Right now there are a lot of properties on the market and relatively few buyers. Not only has that been the driver in lower prices overall, but it also creates the opportunity to find real bargains—properties that are low priced even by today’s depreciated standards.

As all coins have two sides, herewith the flipside of the real estate investment coin–the negatives…

Financing is harder to get

The Great Mortgage Giveaway that began in one or more distant decades and reached its crescendo some time around 2006 is now in the history books. Getting a mortgage these days—especially for investment purposes—won’t be easy. It will require sterling credit, a large down payments, a pile of cash reserves after closing and VERIFIABLE income

You won’t have appreciation to bail you out of a mistake

THE factor that’s made real estate close to the perfect investment is the fact that—at least until 2006 or 2007—any mistakes made by a property owner would be fixed simply by hanging on to it long enough. It was called “appreciation” and it was the real estate owner’s ace in the hole. It didn’t matter if you paid too much for a property, or even if you were carrying it with a negative cash flow (a.k.a., subsidizing your tenant)—time and rising prices would cure all ills and make nearly everyone look like investment geniuses.

Well, we don’t have that critical advantage right now, and may not for a long time—if ever. Not to sound too gloomy and doomy, but the reality is that future price directions in real estate will be dependent on external factors, particularly interest rates and employment. Those cannot be predicted with any degree of certainty.

In practical terms, that means that it will be completely essential to buy property A) at prices well below even current depressed market values, and 2) at a price level that will ensure a positive cash flow from rent.

What’s old is new again, and we’re back to normal here, back to the days when investment real estate was purchased only if it made immediate investment sense. That is, the rent income should be expected to cover:

• Principal and interest on the financing, plus real estate taxes and any required insurance
• Expected repair and maintenance costs
• A reasonable estimate for vacancy—the time in between tenants—as well as the marketing costs to obtain those tenants, and
• A reasonable rate of return on the cash invested in the deal—your down payment

Real estate isn’t very liquid these days

Liquidity is a double-edged sword: the lack of it is the very reason prices have fallen so low, but it’s also why you won’t be able to flip for a profit in a few short years. Any decision to buy property will need to be long-term—check that–very long-term–in it’s time horizon.

Timing may not be the only issue on this front either. Once you buy a property, especially if you’re looking to do so for investment, all the problems of the previous owners of any house you buy will be yours. That means your property will be subject to future declines in value.

We can’t discount the possibility that the market isn’t done sliding; the same factors which have caused the value of a house to fall from say, $200,000, to $100,000 in three years could also drive it down to $50,000. Mind you, I’m not predicting that outcome, only pointing out that it can’t be discounted. Instead of get-rich-quick, we may be playing a game of get-poor-quick if prices don’t stage a convincing turnaround.

 
Considering all of the potential plusses and minuses involved in real estate investing, it maybe that the most important qualification that you can have going in is nerves of steel. Much like the stock market, real estate maybe a game of riding the ups and downs. But one thing we do know going in—buy now and you’ll be buying into a certified bear market—and those are usually the best times to make long-term investment decisions.

What do you think—is now a good time to move into real estate investing? Can you think of any other reasons why we should? Do you have any thoughts on why we shouldn’t?

Related posts:

How to Get a Real Deal on Your Next Home
New Home or Existing Home – Which is the Better Deal?
Eight Ways to Buy Your House For Less
Is the American Dream Dead Now That Housing is in the Tank?
Tax Benefits of Homeownership – Three Reasons It’s Over-rated
Buying vs. Renting a Home – Its Not All About Money

The American Dream – what it is, and what it isn’t

By Kevin M

There’s a growing perception that the famed “American Dream” is dead. You see it written about, discussed in the media, and books on the subject are even coming out. The housing industry has collapsed, sucking out economic activity, jobs, home equity and even mobility.

Housing is, after all, very essense of the American Dream–or is it?

Writer and historian James Truslow Adams, the man who coined the term “American Dream” in his book The Epic of America, written in the depths of the Great Depression in 1931, had a rather different concept. He defined it as…

“…that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement…It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

Where is housing in all of that?

Notice that no where in that definition does a house in the suburbs with a white picket fence come up. So where did we get the notion that it ever did? Congratulations to the real estate industry on a magnificently successful highjack of the famous theme! Ahh, the power of marketing—you really have to hand it to them.

Except for one thing: their one-dimensional definition is completely wrong!

Other than an incidental (and negative) mention of “motor cars”, Adams description doesn’t even include the STUFF we seem to hold so near and dear, let alone a house in the suburbs. His focus instead centers on the environment that spawned the dream–opportunity, a social order in which people are able to become the best they can be and where they can be recognized for their accomplishments

Do you see any stuff in that?

Since the real estate industry seized the concept of the American Dream wholesale, I’d like to forward my own notions of what it means. I believe we can live the American Dream—in America—and in many other places in the world, even if we never own our own piece of ground.

Opportunity. More than any other single factor, this is at the heart of Adam’s description. Even if we aren’t where we want to be in life, if we don’t have the trappings of success we might think we deserve, we have a chance to get there. The reasonable hope for a better life by itself is a form of currency —a driver in our economy—in the economy of any nation.

Ability to earn more money. What about the ability to earn more money by getting a better job, improving our skills, starting a business or through any number of channels? Obviously this is more easily accomplished in a more robust economy than we now have, but it’s something we can pursue and attain even if we never have a house in the suburbs.

Having your own business. This is my personal favorite. I’ve always believed that the ability/potential/promise to be your own boss is the most fundamental component of the American Dream. It represents a chance at complete self-determination, something which I believe is an innate human desire.

At some level a house might make us feel better about ourselves, but having a business of our own is a real chance to be the person we’d like to become. And we don’t need to make a lot of money in order to do that. A sense of control over our destiny can often reduce or even completely eliminate the need to make a lot of money.

Freedom to pursue your own definition of success. One of the most attractive aspects of the American Dream is the potential to decide for ourselves what our idea of success is and to pursue it at our own pace and in our own time. It’s what’s drawn immigrants to this country and continues to do so even now. America has traditionally been a place where a person could come and seek success in a world unencumbered by a strict caste system.

Perhaps we’ve lost some of this concept because we’ve become more fascinated with the nanny state and its implied potential to soften the rough edges of life. Perhaps it’s because we’ve come to a point where we’re confusing stuff—the trappings of success—with success itself. But what ever our distortions, that freedom to pursue success is far more important than what ever it is that has us sidetracked.

Ability to innovate. Who doesn’t dream, at least occasionally, of the ability to “build a better mousetrap”? Let’s face if, doing so could enable you to lock into several components of the American Dream at once. Innovation is our own personal way of leaving our mark on the world. Even if we don’t ever make a fortune, we can still do things that will make a difference to others.

 
So there you have it; no house in the suburbs, no trading up to a bigger one every five years. But still plenty to go on, still more than enough room to give us fulfilling lives, even the lives of our dreams. Are we going to let a housing slump hold us back? Is it possible that once we lessen our dependence on credit and the stuff that it buys, that we’ll actually have more freedom to pursue the American Dream?

What do you think? Is the American Dream still alive and well, or is it on life support? How would you define it?

Related posts:

Selling Your Skills On the Open Market
All Jobs are Temporary! (And What You Can Do About It)
Should You Borrow Money to Start a Business?
Starting a Side Business – Why Now is the Time
7 Ways to Improve the Success of Your New Business

By Kevin M

Are you really getting a deal on a home because you can get it for less than it would have cost three or four years ago?

Maybe. And maybe not.

In most markets, house prices have come down 20, 25, 30% or even more from their 2006-2007 peaks, and that’s caused many to believe they’re getting a deal by buying now. After all, they’re able to buy a home at discount compared to what they’d have gotten if they’d bought at the peak.

At some level, this reasoning is sound. After all, a lower price translates to a lower down payment and a lower monthly payment. And by waiting, you managed to miss the equity plunge that landed so many homeowners in deep trouble and even foreclosure. So far so good.

But is it really a deal?

Just because you’re paying less doesn’t mean a home is a deal

Paying less for a home than you would have a few years ago, certainly has advantages, but it doesn’t mean that what you’re getting is any kind of a bargain. If the price you’re paying for a home is consistent with price levels in the surrounding neighborhood in general, then what you’re getting is merely the market price.

That’s the price of a home that anyone would pay for a similar one in the same neighborhood, but it doesn’t represent a bargain in any sense.

The real determination of whether a house is a deal depends entirely on how the price compares to the current market, not the market of three or four years ago. If we use 2006 market prices as a barometer, then everyone who buys a house today is getting a “deal” because nearly the entire housing market is discounted compared to where it was then.

Getting a Real Deal on a home

In order to get a real deal, you have to measure the price you’re paying for the home versus the current prevailing market. The price that would have been paid a few years ago is now ancient history and no longer relevant.

Simply put, in order to get a true deal, you have buy at a price that’s substantially below today’s market.

With the number of foreclosures, short sales and other distressed properties available on the market, that shouldn’t be too hard. Sadly, many people looking to buy a home pass on these because there may be complications in the sale or there may be some work required after closing. But those are mostly inconveniences, which are not only temporary, but also represent a small price to pay if it will enable you to save $20,000, $30,000, $40,000 or more on a $200,000 property.

If you’re well qualified to buy in a given price range, then you’re in the driver’s seat in this market. It is after all, a buyers market, and you’re a hot commodity!

Here are some steps to identify and bid on homes at a discount:

• Zero in on the neighborhoods you want to buy in, keeping in mind that it’s the neighborhood you’re buying more than a house
• Monitor recent (within six months) closed sales of similar properties in the neighborhoods; this is the only legitimate way to establish market value
• Ignore opinions of neighbors or real estate agents as to property values, as both may have a vested interest in higher prices
• Remember that old sales (again, over six months) are not valid market indicators in a market that’s in a state of flux; the more recent the sales, the better
• Identify distressed properties—foreclosures, short sales, and homes that have been sitting on the market more than six months—these are the properties where you’re likely to get the deepest discounts
• If a property interests you, offer well below what ever it is they’re asking, even if it’s already below market, and be prepared to wait it out; an offer with a 20 or 30 percent discount would not be ridiculous in this market
• Don’t be afraid to insult anyone with a low offer—yours may be the only one they’ve had and could be the answer to their prayers!

Why getting a Real Deal is so important in today’s housing market

The dramatic fall in house prices in the past few years took many by surprise. Even so, don’t fall into the trap of believing that it was a one time event. The fact that prices have fallen so steeply, and so consistently across so many markets means that anything is now possible in the future.

The past few years have opened the reality that real estate is riskier than most imagined it could ever be. The best insulation from those risks going forward is to pay the lowest price possible for any home you buy.

If you are successful at buying a home at a 20% discount compared to today’s market price, you won’t be negatively affected if a spike in mortgage rates or another nasty downturn in the economy cause prices to fall again.

That would represent a real deal on a home, not merely a lower price than you would have paid a few years ago.

Are you looking to buy a home right now? Have you looked at distressed sales? Do you think you can find properties that are deeply discounted based on today’s price levels?

By Kevin M

Despite hints and statistics showing a somewhat improved housing market, now is not the time to merely assume that the market is teeming with good deals and that a return to the real estate price spiral will soon cover any mistakes made in the purchase. The market remains sluggish in most areas, and if it remains this way for several more years, getting the best deal is more important than ever.

The most important moment in the ownership of a home is the purchase. A good deal at purchase can reap big rewards in the future—especially if prices don’t rise appreciably in the near future. You only have one shot at making a good deal, so make it the best you can.

But how do you get the best deal on a home in this market? The same ways you would in any type of market.

1. Buy below current market. Right now a lot of people are mistakenly believing that they’re getting a good deal on a home because they’re paying less for it than they would have two or three years ago. Now I’d rather pay less under any circumstances, but the real issue of getting a good deal isn’t merely paying less than you might have in the past, if less is now the current market. A good deal is paying less than the current market!

Let’s say that homes in a given neighborhood were selling for $250,000 three years ago, but now the typical home is going for $200,000; it’s a better price than it was three years ago, but it’s not necessarily a good deal. The value from three years ago no longer exists. A good deal would be paying something less than $200,000 because that’s the current value. And in most markets paying less than the current market value is very doable, and should be the goal.

2. Buy at peak holiday seasons. Generally speaking, there are two significant annual business troughs in real estate, high summer and the holiday season. In the summer, business tends to tail off after Memorial Day, bottoming out by 4th of July, then slowly rebounding into August. The same situation develops just before Thanksgiving, bottoming out by Christmas, then slowly rebounding after New Years. A lot of people take their vacations during these times or are consumed by non-business activities, such as shopping and the end of the school year.

But what’s bad for business is good for you as a home buyer. If you wanted to pick THE most perfect weeks of the year to make an offer on a home—and to get the best price doing it—you’d do it either the week before/after 4th of July or the week before/after Christmas. Buy during those weeks, and you may be the only prospect looking at a house, let alone making an offer. And by then, sellers are getting discouraged at the lack of activity on their homes and are more open to negotiating.

3. Buy a house that needs TLC. One of the bedrock rules of buying a home traditionally has been “buy the least expensive house in the most expensive neighborhood”. But as this is a different time and a different generation, buying a “turnkey”—a house you can move into immediately with no renovations—has become the preferred practice. In fact, buying a house that’s turnkey and has the most features—wood floors, granite countertops, wood blinds, premium lighting—is causing people to buy the most expensive house in the neighborhood.

There are three problems with this approach, 1) you’ll always pay the highest price in the neighborhood, 2) many of the features you’re paying top dollar for now will need to be replaced in five to ten years anyway and 3) given the current state of the market, you probably won’t be able to recover the premium price paid on the sale of the house in three to five years, as has been the case in the past.

Get back to buying the least expensive house, even if it suffers from some cosmetic neglect. A fading paint job and an uncut lawn can be your best negotiating tools at buying time.

4. Buy a house that’s been on the market at least six months. No seller is more confident than the one who just put his house on the market. Make an offer on his house and he will most likely want something very close to the asking price. Make an offer on a house that’s been sitting on the market for six months or more and you may find a seller desperate to negotiate—anything to make a sale.

After six months the sellers have been through the gristmill. They’ve probably entertained offers that fell through for one reason or another. They’ve known the anxiety of going for weeks without an offer—or even any lookers. Worse, they’ve had a brush with the hopelessness that comes from having a major asset they can’t sell. That’s your preferred seller! They’ve been beaten down, softened up and they’re ready to make a deal.

5. Find a real estate agent who knows what you want and will work to find it. A good real estate agent is your best friend when you’re in the market for a home, but buyers often take the selection decision too lightly. The agent selected is often a family friend, and just as often someone who just entered the business. But you don’t need a family friend working with you on the largest financial transaction you’ll make–you need an expert.

How do you find one? Ask people who have used agents who it was they used and whether they were satisfied. You should hear the same agents name more than once. Make sure the agent has been working the business for a number of years, and knows the area you want to buy in very well. Test their knowledge—ask questions and carefully gauge the answers: are they technical answers demonstrating a deep knowledge of the market, or are they sales answers designed to get you to move forward? Too much sales jargon indicates an agent who wants a commission more than anything, and that agent isn’t working for you.

6. Avoid buying new construction. Let’s face it, most of us want a house that’s OURS—meaning a house that no one but us have ever owned, and that means brand new. Now multiply that feeling by millions of people and you can see why new homes cost more than existing ones.

When ever you follow the herd, you’ll pay more because that’s where the traffic is. Go where the traffic is lighter—to existing homes—and you’ll find a better deal. One of the reasons you pay more is because new home prices are often pushed up by options, like carpeting, light fixtures and window treatments that are a regular part of existing homes. New homes might feel better—for the first few years, until they aren’t new anymore—but the better deals are on existing ones.

7. Know your market area. Make sure you know the price levels in the area you want to buy in. This is the best way for you to know if you’re getting the best deal or even if your real estate agent knows the market and can adequately represent you. You can drive around the area pulling sales flyers from houses for sale, check with the county hall of records for closed sale prices, or look on real estate websites to see what sellers are asking. Realtor.com is an excellent site that offers perhaps the largest number of listings in most markets.

Keep in mind that what you will be seeing on flyers and websites are asking prices and understand that closing prices—the real market value—is something less.

8. Buy BENEATH your means. Buying something as large as a home is a tense situation to being with, so it’s vitally important that you remain in control of all that you can. Control equals bargaining power! When you try to buy at the top of your ability—something many real estate agents will try to have you do—you create stress and limit your options. Buying beneath your means keeps you in control of the financing, and that keeps you in control of the deal. As a buyer, you should never be in a more desperate position than the seller, otherwise you may end up paying too much.

Don’t let the current sluggishness of the real estate market lull you into thinking that any deal is a good deal just because sellers are desperate and prices are lower than they were a couple of years ago. Use these tips and make the best deal you can based on the current market.

Have you ever used any of these methods to buy a house? How did they work out for you?