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Talk about a dilemma for prospective U.S. home buyers -- although home mortgage rates continue to decline -- the average, 30-year fixed rate fell to an average rate of 4.04 percent this week, down from 4.07 percent last week, according to bankrate.com -- home values remain tricky to predict depending on where you're looking.
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Moreover, in China, the word for "crisis" is also used for "opportunity" and with the aforementioned in mind, the U.S. housing sector certainly qualifies as an "opportunity," but it's one that prospective home buyers must research carefully.
What should prospective U.S. home buyers do?
As a preface, it's relevant to point out that very few rules will stop a couple or someone who has found their "dream house."
Hence, if you've found it, and you feel you're going to be in the house for more than a decade, the market conditions and cautions listed here aren't likely to stop you from purchasing it.
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However, for those who haven't identified their dream house, keep in mind the following:
1-The mantra now isn't how much house you can afford, but the minimum amount of house you need. True, if the market suddenly recovers, that $500,000 luxury home could appreciate into a $700,000 bonanza. However, if your local market stagnates, that luxury home could be valued at $450,000 - or even less - in real terms, which means you'll struggle to recoup your initial investment. Lesson: Take on only as much how as you need, to minimize your risk.
2-Have you researched and evaluated the local economy of the town, city, or county your prospective home is in? In politics, there's an axiom: "All politics is local." The same can be said with real estate. If the local economy is strong and likely to experience job growth, the value of your home will benefit. The reverse is also true.
Hence, research the locally economy carefully. Determine what the major industries are and their prospects. Are they likely to add employees in the next five to seven years or more likely to shed employees?
Of course, it's almost impossible to predict macroeconomic conditions 10 years out, but you get the idea: based on what you know about the local employers, does the local economy have decent prospects for growth? In other words, does the local economy look more like Boston, where the prospects for growth are decent? Or like Detroit, where the local economy isn't as strong?
3-Have you bought the best house or almost the best house in the neighborhood? In today's housing market, you have to get everything right, from a home purchase research standpoint. And one key research item is the value of your home vis-à-vis those on its street and in your potential new neighborhood. That's because a sub-par neighborhood can decrease the value of your pricey home...and also make it harder to sell. Ideally, you want a house that is roughly in the middle, value-wise.
