Buying or Selling? Is it the right time?

So – it’s been five years or more that you’ve been hearing that the housing market is up, that home prices are increasing but there are more homes available. That means as a seller, this could be a great opportunity! Or is it? Should you wait to see if the market turns around again?

Not long ago, during that great recession, home prices were declining, the number of foreclosures was increasing and Indiana property taxes were going up and up and up. It was all over the news. As a buyer, and even as a seller, it’s enough to make you simply shut down, afraid to make a move. Is staying on the sidelines your best move?

Playing the market and taking the chance at missing the opportunity? If you’re a buyer, shouldn’t you realize that simply owning the home makes more sense in the long term than renting?

Stay…just a little bit longer?

Typically, if you’ve been in your home fewer than five years and are thinking of selling, reconsider. The value of the home probably has gone up enough to pay the agent’s commission and other selling costs.

The standard feeling is that you should be in your home for five years before selling in order to recoup those costs. If you’re moving and you expect that five years is how long you’ll stay in your new home, you should do well if you buy now. Average home sale prices have been increasing. Keep in mind, of course, that if your personal situation might change before the five years is up, something that could affect your ability to make payments or the type of home you need (uncertain job status, marital change, children), you should reconsider this home purchase.

Financially, make the right move

If you’ve now decided it’s the right time to buy a home in Indianapolis or central Indiana, there are two things to keep in mind. One, don’t buy more home than you can afford. This is what got us into this mess, eh? And two, buy the home that’s right for you, not just the one on which you can get the best deal. It may not be that much more. Principle and interest payments on a 30-year, 6.0% loan on a $150,000 house (with $15,000 down) are $809. Adding another $10,000 in value to the home you purchase ($160,000) only adds $54/month to your payments. How much more house will that $10,000 buy that may make a difference over your time in the home? Adn keep in mind, interest rates are hovering under 4%. How long will they stay that low?

Of course, the longer you own the home the costs of the initial $10,000 add up. But, that additional $10,000 in value might be just the boost some sellers need to part with their homes and get you that perfect home.

Choose the right area

If you’re ready to buy, pick the right neighborhood, preferably one that is holding values well and not loaded with foreclosures. When you have chosen a neighborhood, work with an experienced Carpenter agent to work up a plan. Determine how many homes are available? How many are in foreclosure? Have prices in that neighborhood held up well? More homes for sale and/or more in foreclosure may add up to a better deal now, but will the neighborhood rebound by the time you sell?

REASONS TO BUY OR SELL NOW

1. You’ve found the right house in the right area for you. In a better market, you’d have more competition for the right home. If the schools are great, you love the area and know it would be hard to find another house like the one you have your eye on, why wait?

2. The neighborhood you’ve chosen offers relatively stable prices. Even if they’re not increasing, the decline might be slower than the market overall.

3. Your rent rivals a mortgage payment. If you can buy for the same cost as renting, it’s a no-brainer. And here’s a bonus that renting can’t offer: the mortgage-interest deduction on your taxes.

4. You’ll stay in the home five years or more. You’ll probably ride out any downturn and come out ahead on price.

5. You’ve built equity in your house and are moving to a place where homes are cheaper. In this climate, your money will go a lot further.

REASONS TO WAIT

1. You don’t have good credit or a decent down payment. There are a lot of homes for sale. But the subprime mortgage crisis has made it much more difficult to find a mortgage. Even with good credit, lenders are much more careful about where their money’s going.

2. You’ve lived in your house less than two years. Realistically, you haven’t accumulated equity in your home. This is true in almost any economic climate.

3. You don’t plan to stay in your next house at least five years. Just like the previous point, you have to be in this long enough to accumulate some value in the home.

4. You’re already in a neighborhood where prices are dropping or where the number of foreclosures is spiking. To sell a home in those neighborhoods, you really have to be competitively price. Wait out the storm.

5. Your job security is uncertain. If your job, the company you work for or industry’s future is unclear, stay put.