How to benefit from today's housing market

The news is filled with headlines about the state of today’s housing market: “Foreclosure sales are up.” “Real estate prices are down.” “Borrowers are defaulting on sub-prime loans.” It’s easy to be confused and uncertain about whether now is a good time to buy a home.

But the turbulence we’re seeing in the housing market is not all problematic. For some, it has opened up new opportunities. The National Association of Home Builders reports that between June 2006 and June 2007, the number of homes sold that were affordable to the median household income for the nation as a whole increased by 3.5 percent. That means more homes have become affordable for more people.

If you have good credit and your finances are solid, there are also other ways you may be able to benefit from today’s housing market:

1. Lower interest rates
Today’s long-term fixed mortgage rates are historically very low. According to Freddie Mac, the monthly average rate on a 30-year fixed-rate mortgage in September 2007 was 6.38 percent. That compares to 7.43 percent ten years previously in September 1997 and 10.89 percent, back twenty years, in September 1987. If you’re looking for an adjustable rate mortgage (ARM), the recent Fed rate cut also caused a drop in ARM rates linked to the prime lending rate. And today’s historically low interest rates mean you’ll benefit from increased buying power if you’re shopping for a home.

2. More negotiating power
Whereas in the hot real estate market of a few years ago prospective home buyers often found themselves in a bidding war when making an offer on a home, today’s cooler market means buyers have more bargaining power. Sellers with homes that have been languishing on the market are far more apt to be willing to sell at less than list price or to offer other incentives.

3. Wider selection of properties
Today’s larger inventory of homes for sale means more properties to choose from. It also means home buyers can afford to be more discriminating and take the time to find a home with all of the features they’re looking for.

4. Sales incentives
The weaker housing market has caused many new home builders to begin offering incentives to lure buyers. In some cases, they’re offering price discounts of as much as 20 percent or complimentary extras such as granite kitchen counters or upscale appliances. Some private home sellers are also throwing in a variety of incentives such as paid closing costs or free home inspections.

Historically, the housing market has been cyclical. Every period of sustained price increases has been followed by a period of declining values. It’s therefore not surprising that after the boom of the last 10 years, we’re currently experiencing a housing market correction. In most parts of the country, the days of being able to profit from buying and selling a property quickly may be over, at least for a while. But owning a home and building equity in real estate is likely to remain a sound long-term investment.


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