First-time buyers - Is it time to strike while the iron's hot?

1. Biggest buyers market in a generation
2. Mortgage rates still at historic lows
3. Housing stimulus bill provides up to $7500 tax credit
4. FHA loans readily available with 3% down (3.5% after Jan. 1, 2009) and increased ceilings
   

These are just some of the incentives that first-time buyers have to buy a home now. Not to mention the fact that with the number of foreclosures on the market, that many homes can be bought at less than replacement costs.

So the question becomes - if not now, when?

Media pundits and many economists are saying we aren't at bottom yet and aren't likely to see it until 2009, but like the stock market, you don't really know until after the fact. Rather than trying to time the market, buyers should evaluate a decision to purchase based on their existing situation and whether it makes economic sense.

A fair concern of any buyer would be - "if I buy now, might the value of my new home decrease?" Well, like usual, it depends. Cincinnati has already been cited as one of the most stable markets in the U.S., but even within our metro area there are pockets where home prices have both decreased and increased. If you are planning for the long-term and making common sense financial decisions, then the risk of declining prices is a marginal concern.

If you have been thinking about buying a home, you need to talk to your real estate professional and see if you can take advantage of the current market. Each individual's situation is different and a knowledgeable professional will help evaluate what makes sense for you.

For more information, see the RE/MAX Unlimited site on first-time buyer programs.

August Market Watch

Builder survival in a buyers market

The buyers market has many builders taking it on the chin as new home sales (annualized) dropped to 530,000 in June from a high of 1.2 million in 2007. Surprising, perhaps, is that few builders have gone into bankruptcy during this time. So, how have they managed to do it?

Many have gone through significant cutbacks in operations and staff. Some of the larger builders have sold significant land holdings at "fire sale" prices to eliminate carrying costs. Still others are selling what homes they do have at cost or with very slim margins.

If you are considering the purchase of a new home, many builders are willing to bargain. Finished basements and other upgrades are common.

If you are sitting on the fence wondering when the bottom will arrive, here are some additional numbers to consider:

• Vacancy Rate: 18.6 million homes were empty in the 2nd quarter. This is the highest rate ever recorded while new home construction has dropped to its lowest rate since the early '90s. Notably, the rate of vacant homes for sale dropped from 2.9% to 2.8% (a portion of those vacant are rentals or seasonal/vacation homes).
  
• June Inventory of all homes at current sales rates: Nationally - 11.2 months; Cinci - 8.5 months (both were slightly higher from the May rates).
  
• Inventory of new homes are at their lowest level since 2004.

According to National Association of Realtors Chief Economist, Lawrence Yun, "builders will need to continue to cut back production in order to work down not only new home inventory but also existing home inventory. I anticipate further declines in new construction and new home sales deep into 2009. Existing homes, meanwhile, will likely rise in upcoming months due to the first-time homebuyer tax credit that will go into effect very soon."

More of the latest national housing statistics can be found at:
National Association of Realtors Housing and Economic Indicators

August Finance Corner

Understanding "Total Cost of Ownership"

Did you buy a home without realizing how much utilities, Homeowners Association fees, maintenance, insurance, and other costs added to your monthly housing budget? Many homebuyers look only at the price and later realize that "charming" older home will cost them $400 a month in the winter to heat.

It's easy to get caught up in the excitement of a new home search when you are ready to move, but don't trip on these sometimes hidden costs. Most are readily available if you know where to look:

• Contact the local utilities to see what the budget billing was for the last owner. For most homeowners, this is the single largest expense after the mortgage. An energy audit may also help in determining expected usage.
  
• Check the monthly HOA costs (and what's included in that cost!). You should also determine from the seller if there any upcoming assessments that could be added to the normal dues.
  
• Check current tax assessments with the county auditor.
  
• Check online resources or work with a contractor to estimate updates and maintenance costs. Your real estate agent may be able to assist in finding resources.
• Talk to your insurance agent on what you are likely to pay for homeowners coverage.
• Discuss the potential for mortgage interest deductions with your accountant or tax advisor.
  

The next time you move, work with your financial and real estate professionals to help you evaluate all the costs and tax benefits so you find the home that matches your desires with your budget.

August Energy Smart Tip

Creating an "Energy Budget"

Do you know what you are spending on utilities each month? While gas prices are in the headlines everyday, you might not know that natural gas prices are expected to increase approximately 60% on an average basis between 2007 and 2008 (see the EIA Short Term Outlook). Even if you have a budget to manage your bills, your budget could easily be blown by energy cost inflation.

Following are a few recommendations for establishing an energy budget and controlling costs:

• Have your utilities switched to "budget billing" that sets your monthly bill based on an average of the previous year or quarter's usage. (Duke makes this very easy on their website.)
• Track your average usage from the previous 12 months and make a serious effort to reduce it in some way each month.
• Set aside a specific amount each month for efficiency improvements, then set out a plan to upgrade as your budget allows. An energy audit can help identify what will save you the most on your utility bills.
  
• Moving soon? Make your new home as efficient as possible before you move in. If you can include the cost for energy efficiency into the mortgage, you could actually save money each month and earn dividends over the long haul.

In coming months, I will discuss options for financing improvements and understanding "payback" periods.

For more ways to save, see the Alliance to Save Energy website.