September 22, 2010 / 4:56 PM / 9 years ago

PersonalFinance: Making sense of the housing market

WASHINGTON (Reuters) - Buying or selling a home might be the biggest single financial transaction of your life. Of course you want to get it right. But how — exactly — do you do that at a time when even professionals don’t fully understand what’s going on in the housing market?

A pair of housing units are shown for sale in San Francisco, California in this August 24, 2010 file photo. REUTERS/Robert Galbraith

In August, for example, builders were a pessimistic lot. They told the National Association of Home Builders that they didn’t expect any significant growth in new housing construction for six months. But that same month they broke ground on more new projects than they had since last November. Housing starts were up 10.5 percent from the previous month and building permits were up almost 2 percent.

Meanwhile, the number of foreclosures as well as the inventories of homes listed as for sale have been growing, but, according to the latest Case Shiller index, home prices have been rising, too. So, it’s either a good time to buy a home or a good time to sell a home. Which is it? What’s your next move (pun intended.) Here are some thoughts about how to approach the housing market now.

— Don’t rush. Probably the one housing market observation that everyone agrees on is this: It’s not going to take off in a hurry. Analysts expect it to be several years before home prices generally return to the levels they reached in the bubble years of 2005-2007. And they don’t expect mortgage rates to skyrocket, either. You have time to make a careful decision.

-- Research your own market. Like politics, all real estate is local. Some areas (think most of Florida, Las Vegas, and similar spots) still seem to be in free fall, with high foreclosures and no real recovery in sight. Other areas that weren't so bubbly in the first place (Colorado Springs, Minneapolis, Des Moines) have been doing all right. Check with local real estate agents and Websites like, ( ( or the Standard & Poor's Case Shiller index (here) to see what's actually happening in your chosen neighborhood.

— Expect prices to fall further. There’s a disconnect between what sellers think their homes are worth and what buyers are willing to pay, according to a new survey from HomeGain. Some 79 percent of homeowners believe their homes are worth more than the recommended agent listing price, and 69 percent of agents and brokers think homes are overpriced. If owners really want to sell their home, they’ll drop the price to a level that will attract offers; it’s rarely worth carrying a home for months or years while you wait for the price to get to your desired level. That means that homebuyers may find some better deals ahead.

— Look for a retirement or vacation home now. If you’ve been thinking you’d like a second home now or a future home in the traditional retirement Sunbelt, go shopping. Those markets are depressed by overbuilding, a lack of buyer interest and a boatload of foreclosures. You’ll be able to get a good deal. But beware: You may lack neighbors for years to come. That doesn’t just mean you’ll be lonely; it means you could be paying out-sized condo and clubhouse fees to compensate.

— Plan a seasonal approach. If you need to sell now, price your house low enough to engage a buyer before snow falls. In cold-weather areas, winter is often a long and lackluster time for real estate. If you’re buying, start looking now, but expect that by winter you may get even more for your money.

— Keep it about your own budget. If you want to buy a home and can afford the payments, don’t worry so much about the macro-economic forecast for housing. It’s not like you’ll have to put your house on the market every month, so small gyrations in its price shouldn’t matter to you.

— Keep maintenance in mind. The recession has dampened the market for contractors and for energy commodities. Once the economic recovery strengthens, you can expect to pay a lot more for any repair work your home requires, and for your heating and cooling bills going forward. Look for the lot and the house that will fit your family, but keep an eye on those practical considerations, too.

editing by Gunna Dickson

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