With a smaller percentage of distressed homes selling at auction, banks are loaded up with more of these "nonperforming assets."
In residential real estate, 2009 arrives much the same way that 2008 did: via a rocky road with deepening potholes. While more home buyers are swooping in and picking up great deal, and sales are slowly increasing in many markets, the ongoing excess inventory of foreclosed homes continues to depress the market.
While potential buyers are now getting very low mortgage rates, they also are facing much tighter credit standards and demands for significantly larger down payments. And we haven't even started absorbing the financial fallout from adjustable-rate mortgages slated to ratchet up in 2009.
No one can really say quite when this downward spiral will cease. If former Fed Chairman Alan Greenspan and current Chairman Ben Bernanke were surprised by the depth of this housing crisis, who among us can accurately make the call?
There are growing sentiments out there that this darkness directly precedes a new dawn. A late-2008 consensus survey by Pricewaterhouse Coopers and the Urban Land Institute, based on input from more than 600 industry experts, projects the U.S. residential market should start rebounding appreciably in 2010.
But what about now? This new economy has added new wrinkles to home-buying and home-selling strategies, while reintroducing some of those old-school favorites like sound fundamental fiscal practices. So here are tips for home buyers and sellers to help them survive, and even thrive, in the transition year of 2009.
Cash is king. If you can spare the cash, it has a heck of a lot more buying clout now. In the past, we've tried to persuade people to seek out more liquid investments for their cash on hand and grab an easy-to-get, low-interest mortgage. Now, with the equity markets depressed at the same time that mortgage loans are hard to find, the tables have turned. Those wielding ready cash in a recession are always ahead of the game.
Negotiate extras and more extras. This is a no-brainer in the current market. But while sellers continue to offer throw-ins such as built-in appliances, flat-screen TVs and even cars, the best throw-ins are always the ones that take monetary form. Think paid closing costs, a year's worth of property taxes, repair credits and paid homeowners association dues, to name only a few.
Determine your budget. Do this before you start talking with lenders. They will tell you what you qualify for, but only you can determine what you can really afford.
Research equals savings. Agents will almost always tell you that the time to buy is now. But do your own research. Go online to scour newspapers and other local sources, and look for housing inventory backlogs, the average "for sale" time that the home is on the market and average selling prices.
Watch for foreclosed-property inventory to loosen. Banks will soon be under greater pressure to cut their losses on property they own through foreclosure and to increase revenues. With a smaller percentage of distressed homes selling at auction, banks are loaded up with more of these "nonperforming assets."
Price correctly from the get-go. Unless you're living in a handful of relatively stable U.S. markets, don't start out too high-priced just to "test the waters." Your backup plan of adjusting on the fly might prove futile. Keep that window of opportunity open from the first time the "for sale" sign appears on your lawn. The first 30 days a home is on the market are when it gets the most attention from potential buyers and their agents.
Looks do matter. Don't underestimate the importance of curb appeal. Not only is there an acute price war going on out there, there's also a beauty contest being staged. You may be strategically located in a quiet cul-de-sac, near great schools, great health-care facilities and fabulous shopping, and you may have easy highway access for that morning commute, but unless your exterior is well coiffed and in sparkling condition, other offerings will outshine it.
Don't overdo it. By contrast, if you go too far in improving your place, you likely will not be able to recoup your remodeling investment.
Don't be an ambiguous seller. Either you are going to sell or you aren't. Why waste everyone's time, including yours? If you manage to fetch a decent offer with a test listing in this market, commit to sell. You may be able to buy a better replacement house at a disproportionately lower price with so many steals still out there.
