Insightful advice for leveraging the market to your own advantage
by Jeff Hammerberg,
Special to Q-Notes
We can confidently predict that 2008 will be another lukewarm year in terms of real estate. Recent data shows that home sales have declined to record low territory, sinking year-to-year more than we have seen in over a decade and a half.
Meanwhile, mortgage troubles have spread like a virus, impacting everything from jumbo mortgages and home equity loans to consumer lending rules and credit card rates. For those trying to sell a home, 2007 was a constant uphill battle.
One major problem was that there was enough excess inventory to supply the forward-reaching needs of the U.S. housing market for an entire year. Another was that borrowers were denied loans by overly cautious mortgage companies and banks. Even when buyers were ready to purchase they could not seem to come up with the necessary funds.
So if you made a 2008 resolution to shop for real estate, here are some points to consider in order to help make your home buying endeavor a successful one:
Credit is super important
If you have great credit, lenders want to lend you money because they are reluctant to lend to almost everyone else. If you don’t have great credit, take time to study your credit report, correct errors and omissions, and bolster your rating before you approach a lender for a new mortgage. The stronger your credit, the better your chances of buying a home at an exceptional price.
Documentation has doubled
To verify your income now requires extra paperwork, because lenders have tightened underwriting rules. To avoid delays when applying for a loan, it is a good idea to organize documents ahead of time. Ask your lender what is required, and begin filling a file with the appropriate papers so you can do this tedious task at a leisurely pace.
2008 represents a rare buying opportunity
Those house hunters who prepare themselves before the shopping spree begins — by taking strategic steps to ensure a smooth mortgage application process — will be in a position to reap unprecedented rewards. As the saying goes, “cash is king during a recession.” And although the U.S. may not be in an official economic recession yet, the housing market certainly is.
For those who have been waiting for prices to fall, the time has come. Reliable and relatively risk-free fixed rate mortgages are still available at historically cheap interest rates. A wide range of houses, condos, rental properties and urban lofts are available at wholesale prices. This makes 2008 the year that will be remembered for its generosity toward those trying to buy a great home at a fabulous price.
The time to strike is while the iron is cold, not hot
To strike up a deal when the market is cold, bearish and dead as a doornail is to buy at the bottom with the potential to enjoy strong gains in equity over the coming years. While 2007 represented an unprecedented buyer’s market, the winter months following 2007 into 2008 only enhance the power of buyers to negotiate a fantastic purchase.
Historically speaking, the winter months are the off season in the real estate business, as buyers hunker down to stay indoors and keep warm. After the sun comes out in springtime and the flowers brighten up the yards of homes for sale, buyers once again find themselves competing with other eager shoppers who have been champing at the bit to get out and buy a new home.
Those who wait to shop until the doldrums of winter, however, have a distinct advantage. Sellers are eager to unload properties that are more expensive to heat and maintain in winter, but buyers are nowhere to be found. Show up on a seller’s doorstep with prior loan approval and a purchase offer and you are liable to snag the deal of a lifetime.
For those who are in the market for a home in 2008, the year will likely be both generous and stingy. Bargains galore are on the market at fire sale prices, in virtually every neighborhood in the entire country. On the other hand, money is scarce as hen’s teeth and lenders are still trying to figure out ways to tighten the purse strings and avoid defaults, foreclosures and deeper losses to themselves and their precious investors.
The bottom line is this: Plan ahead for buying real estate in the coming months — especially in terms of your mortgage financing — and you can take advantage of a variety of economic factors that will work in your favor.
Also set aside any bubbly left from New Year’s. You may want to use it to celebrate the purchase of your dream home at a dreamy 2008 price.
— Jeff Hammerberg is the founder of GayRealEstate.com, the largest company in the nation catering to gay and lesbian home buyers and sellers. Access the site for more information on the housing market and in-depth resources.