SE Minnesota Real Estate News

 August 06, 2010|By Brenda Richardson, Tribune Newspapers

Barely a week goes by without another reminder that it's a buyer's market. It's one that's worthwhile to consider, especially if you are a renter, have good credit or feel secure enough in your job to take the plunge. And if you thought new-construction homes were out of reach, think again. For now, they are holding their own against their resale counterparts. Here's why.

1. Attractive prices. Because homebuilders are competing with the huge inventory of existing homes, many are cutting prices and offering options or upgrades at reduced or no cost. In June, the national median sales price for a new home was $213,400.

Prices are rock bottom – with new home prices equal to the prices we were selling homes for in the 1990s. I recommend not to wait to catch the bottom. We're at the bottom, but just bouncing along. The demand is building. When it comes back, prices are going to appreciate very quickly.

Most in the industry say that we will never find these deals again. The builders that own property are trying to get rid of the land. In some cases, you're getting the property free just so the production builders can get the lot off their books.

2. Low mortgage rates. Mortgage rates are at historically low levels. The 30-year fixed-rate mortgage averaged 4.74 percent for the past month. But tighter credit standards make taking advantage of these rates a challenge. Lenders typically require credit scores of 740 for the best rates. Order a free credit report online at annualcreditreport.com to ensure your files are accurate and complete.

"If you have a comfortable income that you believe will remain at that level, now is an excellent time to strike," said David Crowe, chief economist for the National Association of Home Builders. "You can no longer take advantage of the (federal) buyer credits, but these interest rates are a huge incentive to strike now. I think they will remain relatively low for another year, but I don't think they will be as low as they are right now for an extended period. As the economy heats up, rates will go up."

3. Tax advantages. Whether new or existing, a home is a financial asset in which you can take advantage of tax benefits.

"You can deduct the mortgage interest and property taxes from income taxes," said Crowe. "And when you sell the house, you do not have to pay capital gains tax on the first $500,000 in gain." What's more, when you make a mortgage payment, you are building equity.

4. Energy efficiency. Crowe pointed out that improved building codes mean more energy-efficient homes, which cost less to operate.

"Many builders are also offering green options that include not only energy savings but such things as water conservation, orientation of the house to take advantage of solar energy, use of recycled materials and reduction in waste when the home was built," he said.

Despite bargain prices in the resale market, it's a good bet that older homes will need energy-saving improvements to make them more comfortable and efficient.

"Everyone sees the bottom line and thinks they are getting a good deal," said Cross. "We do a lot of remodels, then realize the home was not such a good deal to begin with. It's not cheap for energy retrofitting. When a home is already fitted for energy, you're much better off. We always do double-pane, low-E insulated vinyl windows. And we always do spray-foam insulation and well-insulated exterior walls. You can have the best air-conditioning system in the world, but if your house isn't insulated it doesn't matter."

5. Amenities. Many new-home communities offer a wealth of amenities, with acres dedicated to lakes, trails and parks. Residents can jog or bike along trails meandering through the landscape or play a nearby round of golf.

6 A place to call your own. For many people, homeownership offers peace of mind and a feeling of stability.

"There's the psychological benefit of it being your place," said Crowe. "You can decorate it, renovate it, change it and customize it to your taste. You don't have to ask the landlord (for permission)."

"Buying a home is still the American dream," said Konovodoff. "Maybe it won't appreciate today, but over time it will. You'll find that the home you're buying today is a great investment."

We appreciate the opportunity to help you with your next purchase. Contact the Phillips Property Group for our help in assisting you with your new or existing home purchase.