Real Estate Guide 2009
A drawing of a house with large windows, wood a car in the drive way and a couple trees on top of a set of house plans
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Finding the 'perfect' time to buy a home

It could be coming soon. More than 800,000 properties received foreclosure filings in the first quarter of 2009, an increase of 9 percent from the previous quarter and 25 percent from the same period a year ago, according to RealtyTrac.

Assess affordability: Falling real estate prices and interest rates have made owning a home now much more affordable compared with a few years ago. Affordability reached a three-year high in February, when the median-priced existing single-family house sold for $164,600, according to the National Association of Realtors.

However, affordability isn't spread equally across geographies. Homes in Indianapolis are within reach for most families living there, but dwellings in New York City are not. And expensive regions with high job losses -- such as California, where the unemployment rate exceeds 11 percent -- face heightened risk regarding affordability.

Kendall advises buyers -- even in markets with high affordability levels -- to pay attention also to the price ranges at which purchases are occurring. If sales are closing only at the lower end of the market, then pricier homes in the most desirable neighborhoods could still fall further.

Consider your plans for the property: In the current property market, owner-occupants can enjoy significant advantages over investors. Recently, creditworthy owner-occupants have locked in 30-year mortgages at fixed interest rates around 5 percent -- close to a generational low. Those who have not owned a principal residence for the past three years may also receive an $8,000 tax credit on a home purchase.

Such incentives are particularly attractive to buyers planning to stay in their home for many years. "If you're looking for a long-term hold, you're talking about locking in the lowest rates anyone's ever seen," says Matty. Buyers looking for a second home or rental property, though, need to focus more on price and potential return-on-investment because those low rates aren't available to them. Additionally, they're often competing with owner-occupants who can secure much lower monthly payments.

Markdowns don't matter, fundamentals do: In some of the nation's most battered real estate markets, such as California's Central Valley or South Florida, it's common to see homes selling for well below half their peak value. Those offerings may seem compelling, but often they're not. The issue, says Sharga, is that many pricey homes were built in regions that did not have enough residents who could afford them. The fact that values have dropped may be less an indication of abundant bargains than of widespread overpricing a few years back.

Just as prices overshot on the upside a few years ago, they can overcorrect on the downside. Mark Boud, owner of consulting firm Real Estate Economics, predicts just such a phenomenon. Although he believes housing is undervalued currently by an average of 10 percent nationwide, he still expects prices to fall another 4 percent over the next 12 months due to job losses. That said, Boud still contends conditions are favorable for homebuyers who plan to hold for a long time, saying, "We've overcorrected on a national basis, and that eventually translates into appreciation."

Joanna Glasner is a freelance writer in California.

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