Recs

3

Homebuyers Stay in Control

You can always find someone who believes in a grim future. But when groups with an interest in seeing a bright future start saying that things look bleak, it's fair to start worrying.

For the millions of Americans trying to sell their homes, the latest news from the Mortgage Bankers Association (MBA) isn't good. The MBA sees sharp drops in sales of both existing and new homes this year, with mild rebounds expected for 2009. MBA economists believe that just less than 5 million homes will sell this year, which is down by about 700,000. New-home sales should suffer a similar drop of 15%, representing about 117,000 fewer homes sold than last year.

That's bad news for a whole host of industries, too. Obviously, companies that build new homes, like Centex (NYSE: CTX  ) and Pulte (NYSE: PHM  ) , have been suffering since the last part of 2005 and can ill afford to take any more blows. Moreover, with fewer transactions, there will be lower demand for new mortgages. The MBA projects mortgage production will fall 16% this year and another 4% in 2009, which will continue to hurt lenders like Wells Fargo (NYSE: WFC  ) and Countrywide Financial (NYSE: CFC  ) .

Two sides to every deal
Buyers, on the other hand, couldn't ask for better news. Earlier projections that had the housing market recovering early in 2008 would have left buyers scrambling to take advantage of the busy spring sales season, potentially leading to increased competition and driving up prices.

With slow conditions expected to continue throughout the year, however, buyers can go through the process at a more deliberate pace without fear of missing out on the best prices. The MBA believes median home prices will fall about 2% in 2008 but regain most or all of that drop in 2009.

Although credit markets have tightened up substantially, those borrowers who do qualify for financing should get a pleasant surprise. Mortgage rates are at their lowest levels in more than two years, giving buyers more bang for their down-payment bucks.

Making the most of leverage
If you're used to the go-go housing market of the past 10 years, negotiating from a position of strength may be a new experience. There are several ways you can use that strength to your advantage when shopping for a home.

  • Consider a buyer's agent. If you work solely with the listing agent, you're already at a disadvantage. In most cases, listing agents can work only in the seller's best interest. But you can even things up by getting a buyer's agent, who will work exclusively for you. Good buyer's agents will give you all sorts of information about properties and the other players involved in transactions. And the best part? You probably won't even have to pay for it, as your agent will typically receive a portion of the commissions that the seller  pays.
  • Offer what you want. The days of trying to guess how much you should add to the listing price to get your foot in the door are over. Now, you can make an offer that reflects your opinion about how much the property is worth. While many sellers have thus far held the line on price reductions, bloated inventories may convince them otherwise. And it never hurts to make an offer, even if it is low. You might find a "motivated seller" who'll take it.
  • Get what you pay for. When housing was hot, you also couldn't make demands on sellers. Asking for things like inspections and financing contingencies risked getting your offer tossed out the window. Now, you can take the time to make sure the house you like is in good condition and suits your long-term wishes. Moreover, some sellers might even pay for part of your due diligence, either by sharing closing costs or by agreeing to further price reductions.
  • Get incentives to buy new. If you're buying direct from a homebuilder, you should make sure you get something extra. Some homebuilders have offered gift cards to Home Depot (NYSE: HD  ) or Lowe's (NYSE: LOW  ) to help with remodeling costs, while others give free vacations or other valuable merchandise. Be sure that you get your fair share.

After years of having to make above-market offers to have any chance of landing a home, buyers are finally enjoying the best market they've seen in years. If you're looking to buy, don't sell yourself short -- take full advantage of these conditions. You may not see them again for a very long time.

Check out these articles to learn more about:


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 558254, ~/Articles/ArticleHandler.aspx, 4/19/2014 9:13:38 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 1 day ago Sponsored by:
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 2.54 0.14%
NASD 4,095.52 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

6/30/2008 4:03 PM
CFC $4.25 Down +0.00 +0.00%
COUNTRYWIDE FINANC… CAPS Rating: No stars
CTX $11.95 Down +0.00 +0.00%
Centex Corp CAPS Rating: *
HD $77.09 Up +0.51 +0.67%
Home Depot CAPS Rating: ***
LOW $46.80 Up +0.07 +0.15%
Lowe's CAPS Rating: ****
PHM $18.71 Down -0.19 -1.01%
PulteGroup, Inc. CAPS Rating: ***
WFC $48.93 Down -0.16 -0.33%
Wells Fargo CAPS Rating: ****

Special Offer for Savvy Investors Like You!

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut semper dui vitae molestie venenatis. Suspendisse.

Enter Email Address:



Privacy / Legal Information
Advertisement