The state of the economy, interest rates and market cycle all play a role in the final price of your dream home, but it's not always easy to tell whether now is a good time to become a homeowner. First time homebuyers are typically nervous about entering the homebuying market because they simply can't tell the difference between a buyer's market or a seller's market.
In a buyer's market, housing prices are very attractive and interest rates may be lower than the average. You may even see more 'For Sale' signs in different neighborhoods and sellers may be willing to reduce their prices drastically just to sell the home.
In a seller's market, it may be very difficult to find attractive prices on homes. You may hear about lotteries that allow certain buyers to bid on exclusive homes, and the housing market may be in 'crisis' mode.
If you're a first time homebuyer, catching the right market cycle can make a significant difference in the final price you pay and the value your receive from your purchase. Barron's 'Smart Consumer's Guide to Home Buying' explains that "cycle phases are much easier to pinpoint long after the fact." However, "if you know what to look for, it's easier to figure out the state of the market." Consider these additional key indicators to make the best possible decision when considering buying a home:
In a buyer's market, you can expect to see: many 'For Sale' signs around the neighborhood; many auctions of repossessed homes and drastic discounts on formerly high-priced homes and estates; sellers offering concessions and incentives to attract strong buyers; a rapidly rising number of foreclosures; many price reductions and lower-than-average prices for high quality homes.
In a seller's market, you can expect to see: very few 'For Sale' signs around the neighborhood; relatively high prices and competitive selling tactics within the same neighborhood; people 'flipping' homes where they buy a home and renovate it to sell it in a very short period of time; news stories that point out how unaffordable it is to buy a home; lots of rental complexes being converted into condominiums.
Obviously, the best time to be a home owner is during a buyer's market when sellers are anxious to sell their properties at their published price or offer discounts for a quick sale. You can jump into the homebuying market with more confidence when homes are being advertised with drastic price cuts and offering you extra incentives to make an offer. However, it's still important to work with a professional realtor to find the best home that suits your needs - especially if you will be a first time homeowner.
Buying your first home can be challenging and you're likely to have lots of questions about the entire process. Educating yourself about the market, looking for indicators of favorable market conditions and working with a professional can help you get started on your search and provide you with the best possible options in your neighborhood of choice.
