Market Conditions

Chances are you are already very familiar with the 'micro' variables that affect your offer on a new property. Generally these are things like:

House size

Neighborhood Location



Resale value

But have you taken the time to look at overall market conditions. These are factors that are generally out of your control. But don't despair. Simply because they are out of your control doesn't mean that you cannot have an understanding that can give you an advantage over others in the same position.

The Renaissance scholar Machiavelli once said stated that fortune to a torrential river that cannot be easily controlled during flooding season. In periods of calm, however, people can erect dams and levees in order to minimize its impact. Fortune seems to strike at the places where no resistance is offered, as is the case in Italy.

There is a lesson here, even after all of these years for potential homebuyers. When things are raging as they often are in what is known as a buyers market there is very little and you should just enjoy the ride. On the other hand when there is a seller's market you have less control and you should prepare yourself for when things are raging.

Buyer's Market And Seller's Market

What is a buyers market, and what is a sellers market? Here is a brief explanation.

Seller's Market Suring a seller's market basically there are more buyers than there are properties. This means that the moment a home goes on the market there will be many offers immediately. The amount of offers and their seriousness then affect the price of the home. In these instances a home will often go for more than the asking price, and even a couple thousand more dollars on your offer can be the difference between getting the home of your dreams and having no home at all.

Buyer's Market Obviously the Buyer's market if the opposite. This occurs when there are far more homes for sale than people who are willing to buy them. A buyers market I a little more complex than a seller's market. Many people, unless they are in dire straits will not sell their home if market conditions are poor. If they do have to sell, they may only get a few offers a month, and even then they will be less than the asking price. In this situation you must really know how to negotiate. It is also very important to know why it is a buyers market. Is there something wrong with the neighborhood? Are there any planned developments that may decrease the resale value of the home? Toxic waste spill? These are things you must know.

However, often the market is a combination of these two factors. This is known as a steady market or a transitional market. In this case, any number of factors can affect the price of a home, and you'll need to do even more research to determine what course of action to take.

While things in the real estate market can change at the drop of a house key, today, things are generally very good. Even as the economy faltered after September 11, 2001, the real estate market was one of the only bright spots on the economic horizon. As people began to feel insecure, homes provided them some measure of security. This of course created a seller's market.

But, as the seller's market boomed, it also became a lucrative market for building homes. Therefore more and more new cheap homes flooded the market and sellers became desperate. This created the buyer's market that w have today.

Other Factors

Naturally there are other factors involved as well, and we'll take a look at those.

Interest Rates This one is a big one. Today interest rates have been lower than they have been in years. Therefore, for first-time homebuyers, mortgage payments represent the largest cost of buying a home. This means that simply paying for your home is your biggest cost, not paying the interest. Many banks will offer a fixed rate mortgage. This means that no matter what happens to interest rates, you will continue to pay the same rate. However, it also means that if rates down further, you will be paying more. Luckily there are also split long and short mortgages. This means you can pay half of the mortgage at a fixed rate, and the other half at flexible rate that changes with the market. The price of renting has also gone up lately, so in most cases it is cheaper to begin paying a mortgage than it is to keep on renting. The previously mentioned new housing developments often have some of the best interest rates, sometimes even one or two per cent below the bank rate.

Housing Prices Housing prices can be deceiving at times. For instance, house prices have not changed that much over the past couple years. While this is great in itself it also has some added benefits. Those came companies that are building massive new housing developments trying to keep up with each other in market that doesn't favor them. This translates into homes with better layout and design, bigger yards, included amenities and a plethora of addition features like fireplaces and pools. This also means that home sellers in many areas have been forced to renovate their existing property to increase it value. While this really means building a pool, you will often find a new kitchen and a deck or some fencing thrown into the mix. Not a bad deal at all.

Decline in Renting As was mentioned before, renting has become a worse and worse option in this new housing market. In most cases 37% of renters could afford to buy a starter home. This means that the price the price of the mortgage, plus the applicable interest is still less than their monthly renting agreement. There are also other factors in home ownership that are making it easier these days to buy a home as an alternative to renting. Firstly, stable heating costs and property taxes are lower. Also, if you do not need the space you can live in the home, rent out the rest and pay for your mortgage that way. It means preying on the 37%, but they may not need to buy a home anyway.

Down Payment Often the down payment is the biggest hurdle in buying a new home. This can be as high as 15% depending on your situation. However, as was mention, as new housing developments are springing up everywhere, down payments are becoming lower and lower. Often you can get a down payment for as low as 5%. This is often the case for first-time homebuyers.

First-Time Many banks are also beginning to offer introductory rates to people who may not be buying their first home, but who have previously demonstrated that they are responsible homeowners who were forced to sell their home for other reasons. This could include selling as part of a divorce, or selling because of a new job opportunity.

Long-Term Investment

No matter what course of action you take, always know that buying a home has proven to be one of the best investments you can make. No matter what market conditions are people need to live somewhere. Here are some more interesting facts:

One in four (23%) would consider taking a second job in order to be able to buy a property 16% say that they would consider buying with friends Almost a fifth (17%) would consider buying a property in a poor condition which needed renovation One in seven (14%) would try to borrow their deposit from their family 11% would move to an area where they didn't know anybody so that they could afford a home One in ten (10%) would take in a lodger 42% expect prices to keep rising over the next two to three years One third of people (34%) who currently pay rent anticipate their monthly outgoings would increase when they get a mortgage. One quarter (25%) of those who live with their parents anticipate mortgage payments would be more expensive than paying rent. Despite this adversity, potential first time buyers cannot wait to get their own home. Over half (56%) of those questioned think that the time it will take them to buy is too long. This figure rises according to expectations of the time-scales involved in buying a property - 58% of those who think that it will take between one and two years to buy consider this to be too long; 70% of those who think that it will take from three to five years also consider this to be too long.