Time to be a Down Market Purchaser

5 reasons why it pays to buy a property in a down market:

5) More selection – Even when it’s a “buyer’s market,” that doesn’t stop people from selling houses. Deaths, divorces, job transfers and foreclosures don’t slow down just because it’s a buyer’s market. There will inevitably be a glut of houses on the market, and it only benefits prospective buyers.

4) More room to negotiate – A slower pace to the market means more time to walk away and make them sweat. Buyers have the upper hand, not only because there will be fewer prospective buyers to compete with, but also because there will be high inventory.

3) Greater room for appreciation – Even small home improvement projects can mean big returns during selling season. Profits are maximized when you keep overhead costs low by doing the projects yourself and when you score a great deal on your home in the first place by buying when the market is down.

2) Down payment – The money you saved toward a down payment goes further if costs are reduced due to a down market. Instead of a 20-percent down payment, you may find yourself with a 25- or 30-percent down payment.

1) Taxes – Simply put, there is never a bad time to own a home. The buyer’s market is obviously the best time to buy, but regardless of that, the lure tax benefits and credit record improvement should make you want to own a home yesterday.

Does it make more sense to rent or to buy in San Diego?

In its most recent Rent vs. Buy Index, real-estate data provider Trulia performed a quarterly comparison of renting and buying a two-bedroom home in the country's 50 largest cities.

The report claims that it's currently cheaper to buy than to rent in nearly three-quarters of the 50 largest cities in the country, with Miami, Las Vegas and Arlington, Texas, leading the list. New York, Seattle and Kansas City, Mo., topped the list of cities where renting makes more sense.

So where did San Diego land?

A little past the middle, at number 32. Trulia's assessment of America's Finest City: "Renting is less expensive, but buying might be better." Trulia estimated the median rent for a two-bedroom apartment in San Diego ranges from $1,500 to $2,200 whereas the median home price is $330,000.

San Diego's ratio was 15, right at the cut-off point at which owning is cheaper than renting.

Overview of Results:

• Price-to-Rent Ratio of 1-15: Owning a home is much less expensive than renting in this city.
• Price-to-Rent Ratio of 16-20: The total costs of homeownership in this city are greater than the costs of renting, but it might still make financial sense to buy depending on the situation.
• Price-to-Rent Ratio of 21+: Renting in this city is much less expensive than owning a home.

First-time Home Buyer Checklist

First-time buyers planning to make the shift from renter to homeowner this year should begin preparations as early as possible.

Prior to starting the home-buying process, potential buyers should make sure they are ready to buy a home where they will live for three to five years or longer, since it can take that long to build equity in a home and recoup investment costs.

The first step a home buyer should take in the home-buying process is to check their credit score. Lenders base mortgage qualification on a variety of factors, including income and assets, the borrower’s debt-to-income ratio, pattern of savings, and job stability. However, the most important factor is the credit score. Lenders tie the interest rate the borrower pays to the credit score, so borrowers with a credit score of 720 and sometimes 740 and above are the only ones who will pay the lowest mortgage rates. Borrowers with a credit score below 620 may not qualify for a mortgage at all until they can improve their score.

After the lender tells the borrower how much they can borrow, each potential homeowner should create a simple budget for themselves with income and spending to determine how much they are willing to spend on housing payments. Financial experts recommend that homeowners spend a maximum of about 30 percent of their gross monthly income on principal, interest, homeowners insurance, and taxes. Included in the budget should be approximately 1 percent of the home price for condo or homeowner association fees and maintenance costs.

Now that you have your financing lined up, a budget in mind, and an area that you want to live, you're ready to start shopping for a house!  Give us a call if you have any questions about the home-buying process and, of course, when you're ready to start viewing properties.