Buying a House in Today's Market

The housing sector is not what it was formerly. Unless you've been living under a rock, I'm sure you realize that! For decades, housing prices went up and up and up. There were a couple of years of adjustment, now and then, but in general you could count on making money with home ownership. According to who you talk to, it could be that that's all changed! Some people think that the economy will heal in a few years. (They're dreaming!) Others think this might be the new normal. The reality is probably somewhere in the middle of those two extremes. Where exactly is anyone's guess.

This greatly impacts your house buying decision, because you are now no longer assured of making money through appreciation. Heck, you're not any longer assured of appreciation at all! In other words, if you want to earn money on your house, or even if you only want to break even, you must buy at market price or less. And, that's a new concept for most housing buyers.

If this were some other type of investment you were buying, it would all be a lot easier, simply because you wouldn't be emotionally involved. But houses in america are historically different! They're both investments and then a place to live, a home to come home to, and a spot to raise a family in. It is difficult to make good financial decisions when you are emotionally attached to something.

We're in a down market. A down market is different from an up market. In a down market, you must buy below value in order to generate an income or even to break even, as I've said. The psychology of a market like the one we're in is something that folks aren't used to, though. For instance, many buyers get their cues as to the value of a house from the asking prices of other houses they've seen. If, for instance, everyone is asking $700,000 for a given type of house in a given area, most buyers might assume that that's the real value of a house they're looking at. In an up market, that was probably the case. Or even if it weren't, you wouldn't get hurt far too much believing that price because in a couple of years appreciation would save you. But now, it could easily be that everyone who's home is on the market is asking excessively.

You see, most of the people who have houses on the market bought only a few years ago during the up market. Put simply, they paid excessively! They also leveraged themselves far too much. This means that, their mortgages are too big. They price their houses so that they can at least pay off their mortgages. But even the mortgage amount is more than the property is currently worth. So, if you buy at the seller's price, you're already paying excessively.

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