On the surface, the housing market appears back to normal. Banks are gradually making loans, interest rates are still low, new home construction is increasing, and the record number of homes falling into foreclosure no longer dominates any conversation about real estate. While the new lending regulations have put an end to the rampant predatory lending practices of the late 1990s and early 2000s, a blog post by Sam Khater of CoreLogic reports that REO properties increased to 430,000 in March of 2014.
Some people still struggling
Additionally, a recent study by the Haas Institute for a Fair and Inclusive Society at the University of California, Berkeley found that the “housing market recovery” is missing a large percentage of American communities. While there has been a great deal of news about loan modification programs, the Home Affordable Modification Program has only benefited about 25 percent of the four million borrowers it was intended to help.
The study states, “Despite home prices rising in many parts of the country, the total value of owner-occupied housing still remains $3.2 trillion below 2006 levels. Despite rising home prices, there are still some 9.8 million households underwater, representing 19.4 percent of all mortgaged homes -nearly one out of every five such homes.”
Market will never be the same
We can no longer speak of the real estate market in the same broad terms that were once used to summarize activity. It will never go back to “normal.”
You have to consider all available information and make your decision about buying and selling based on your individual situation and future. You are not going to be able to perfectly predict home prices anymore than you are able to predict the winning lottery numbers or stock prices. For some homeowners with negative equity, they have little choice in the matter. If you were waiting for prices to improve and are no longer upside-down on your mortgage, you have a few things to consider.
Why are you selling?
A job transfer adds a level of urgency to selling and buying a home that few other situations have. If you are selling due to transfer, first check with your employer about options available to you in the relocation package. They can often assist you in many ways and may absorb all or part of any financial loss. The FHA will allow new mortgages for borrowers who currently have FHA-insured mortgages if a job transfer requires a commute that is not practical from their current home. Both Fannie Mae and Freddie Mac also have purchase programs for loans made to transferees with existing home loans.
If you need more space due to a growing family or an elderly parent is coming to live with you, consider the cost of remodeling and adding on to your existing home. According to a recent CNN Money article, many home sellers are having a difficult time upgrading to a larger home, due to higher prices and low available inventory.
For empty nesters and others needing to down-size, consider leasing your current home through a reputable management company. It will alleviate much of the headaches associated with renting and give you a bit of financial breathing room in the sell of your current home.
Do the numbers add up?
Just listing your home for sale is going to cost you money up front. If you decide to sell without a Realtor, you are going to have advertising expense and the time involved in answering calls from prospective buyers, along with scheduling showings and negotiating offers.
First impressions play a crucial role in how much buyers are willing to pay for their next home, so don’t forget to make any needed repairs and deep clean your home before listing it for sale.
You also have to consider how selling your current home and buying another affects your personal and financial long term plans. Do you really want to take on increased property taxes and potentially a higher mortgage? More square footage may solve one problem, but does it restrict your ability to do other things in life that you want to accomplish. For many people who wish to travel or just enjoy hobbies other than home repair, selling an older home to purchase a newer, lower maintenance home makes sense.
Will you have to work more hours to afford your new home? If you are out of work, how many months can you pay the mortgage, HOA fees, and property taxes?
Review each of these questions with your personal financial planner. Buying and selling your home is not like other investments. It is more about the lifestyle you have or want to have and simplifying your life rather than trying to predict when values are at their peak.
Guest post by Frank Stegall, a real estate agent for eight years and a real estate consultant and professional writer since 2009.