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Thursday, January 11, 2007

Real Estate and Homeowner News & Knowledge

eNeighborhoods Neighborhood News

Buyers and sellers find balance as housing market cools

For the last few years, residential real estate burned hot in the headlines with speculation, soaring property values and brisk sales. But now, with mortgage rates rising and sales slowing in many areas, the tide is turning. Clearly, with homes selling at a slower pace, buyers have some additional leverage to apply at the bargaining table.

With housing inventory up, buyers typically have a larger selection to choose from, and more time to make buying decisions. Also benefiting most homebuyers is the lack of competition from speculators. As home prices shot up in the last few years, it was possible for investors to “flip” properties by buying and quickly reselling at a profit, but current market conditions make this practice much more difficult.

In fact, a time-tested strategy to maximize returns on residential real estate is to simply stay put. Just like buy-and-hold investors, homebuyers who keep their homes for more than five years are much more likely to see profits than those who buy and sell in a shorter time period.

But that doesn’t necessarily mean the party’s over for sellers. Nationally, home prices have remained solid and a well-priced home in a desirable neighborhood should move quickly regardless of current conditions. And though interest rates are rising, they are still low by historical standards…as anyone old enough to remember 30-year mortgage rates north of 16 percent in the early 1980s can attest.

Did you know?

After raising the Federal Funds interest rate 17 straight times in 27 months, the Fed left it at 5.25 percent in early August, saying it wanted time to study the rate’s effects on inflation.

Has your home insurance kept pace with property values?

Homeowners policies are long, complicated documents that aren't exciting to read. Many people avoid them because they feel confused by the language and complexity, but there are some basics every homeowner should know. For example, in case of a total loss, does your insurance enable you to rebuild a comparable house in its place?

In many areas, home values have soared in the past few years. If you’re fortunate enough to live in such a neighborhood, now is the time to check with your insurer – not after you've filed a claim and learned your coverage isn't up to par.

If you’re not sure, ask directly what your replacement policy covers. You may be surprised to learn that "cash" or "fair market value" may not replace all that was lost. For example, fair market value factors in wear and depreciation, so you might receive what your furniture and appliances were worth before being damaged, not what it cost to replace them after. Ask your insurer if your policy includes “full replacement value” for your home’s contents.