Overheated Housing Market?
Consider Renting
Question: We're trying to buy a home in an area where the market is very strong. Every time we find one we like, it turns out it's already sold. We've made four offers at our limit on homes, but have been told better offers were on the table and the sellers rejected ours. With interest rates rising, we can't afford to pay more, so we seem priced out of housing. Is there any way we can buy a home under these conditions?
Answer: You have two choices: Either you must find a way to pay the outrageous prices that some properties are going for, or you must choose to bow out of the market and rent for a time.
Prices have moved up so fast that in some areas brokers have begun inserting a statement in sales agreements to the effect that the buyer understands that the price being paid may be substantially more than the market value of the home! I assume this is to keep the buyer from later coming back at the agent if the market price should fall in the future.
Tips for Negotiating With a New-Home Builder
Keep in mind, that all markets go up as well as down. Residential real estate dropped in value nearly 30% nationwide between 1989 and 1996.
Now it's hot and shooting upward. This up-cycle, too, will pass. Why not consider renting? In most markets you can rent a home for about half to two-thirds the monthly cost of buying it. True you don't get the income-tax deduction for interest and property taxes and you don't get appreciation. But, then again, you're paying far less each month.
If you find you can't financially play the home buying game today, why not wait, rent, and see what happens? You might be in a perfect position to take advantage of the next residential market meltdown. And while you're waiting, you might just take that down payment you have and try to grow it in the stock or bond market.
Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Buy Your First Home," (Dearborn, 2000).
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Sally, Santa Rosa, Calif.
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