Every set of market conditions has the potential to create both financial losers and financial winners in the marketplace, and the current set of housing market conditions is no exception. It wasn’t that long ago that an exploding “seller’s market” in real estate bloated home prices everywhere. Those who sold their homes cashed in big, often netting tens of thousands of dollars or more from their initial investment only a few years earlier. And, unless those sellers chose to become renters after cashing in (few did), they were immediately faced with the prospect of buying their next home in that same seller’s market. On the whole, some won and some lost.
Today, the tables are turned. It is now a “buyers’ market.” Real estate prices have fallen nationwide. In markets (particularly on the coasts) where housing price inflation had risen the fastest, prices have fallen the farthest. In markets like the Ozarks, the impact is far less extreme. And, just as with any other set of market conditions, a lot of people could be poised to win big in this buyers’ market. And many of them don’t even know the opportunity that lies before them.
Who stands to benefit most from making their next move in today’s buyers’ market? Three profiles are poised to take prime advantage:
- The cash buyer: In the Springfield/Branson housing market, cash buyers aren’t as uncommon as you might think. Relocations to this area often arrive with savings that go much further than they expected. Retirees from a career at an average income in a high-cost part of the country find their accumulated 401(k) savings add up to considerable wealth in a more affordable Midwestern community. Or, families that sold one of those high-priced homes on one of the coasts learn they can buy twice the home here for half the money they just collected. Cash buyers are well situated because they are not affected by credit limitations or fluctuating interest rates, and they aren’t at the mercy of someone else’s timetable to buy the home they already may own.
- The first-time home buyer: For all the media coverage of the nation’s “credit crisis,” local banks are competing with one another to loan mortgage money to qualified borrowers. A first-time home buyer has many advantages. They have no existing home to sell in a buyers’ market. They can take advantage of historically low mortgage rates, even if those low rates may hover a half to three-quarters point higher than some recent rates (since they are not “trading” an existing interest rate for a new one, they have no downside to taking advantage of today’s traditionally low rates). In this buyers’ market, first-time home buyers can make sellers compete for their business. And, if all that weren’t enough, Uncle Sam is even willing to help. First-time home buyers – if they act soon – can receive a $7,500 federal tax credit to help with the purchase of their first home.
- The “move-up” buyer: Any buyer planning to buy a home of higher market value than the home they are selling is in position to win big in a buyers’ market. Let’s assume a family is selling a home they believe is worth $100,000, to buy a home they believe is worth $200,000. Too many such buyers are hesitant to make their move because they believe they would “lose” money on the sale of their house in a “depressed housing market. A little quick math proves otherwise. Let’s say the market “depression” equates to about 25% (meaning, homes today will only bring 75% of what they would have brought a couple of years ago). That means that $100,000 home would only bring $75,000. So, the family considering a move has “lost” $25,000, right? Not so fast. In a “down” market, that home won’t be the only one bringing a lower price. The $200,000 home the family wants to buy is also down by 25%. It can be had for a mere $150,000. The family that “lost” $25,000 on the first house turned around and “made” $50,000 on its next home. That’s a net gain of $25,000 in equity! The more “down” the housing market is, the more this type of buyer stands to gain.
In periods of economic difficulty, someone always wins. Why shouldn’t that someone be you? If you fit the profile of one of these three types of potential home buyers, you could win big in today’s housing market – don’t wait!