7 Reasons To Rent And Not Buy A Home Just Yet

why rent and not buy

These are 7 very convincing reasons why you should continue to rent a home and not buy one, at least just yet.

If You Expect To Move

If you expect to be re-located in the near future, you should be especially careful about buying a home. People move for many reasons which do not always have to do with their jobs.

Unless you’re planning to hold on to the property that you buy or convert it into a rental when you move, buying a home does not make sense because you will have to incur further costs in selling a home and buying a new one which will mean that your current property should have appreciated at least 15 to 20% in order to cover those costs.

Consider buying a property only if you intend to hold it for 3 and preferably 5 years.

If you are lucky and you are situated in a time and place where the property prices sky rocket then you could well make a profit if you sell after 5 years. This is fairly common in developing areas, cities and economies.

Pressure Of Sales Pitches

When you purchase your home, it will be you who will live in it and face the expenses. Do not purchase home under pressure from pushy salespeople or advice of other homeowners. Do it only when it makes complete financial sense to you.

You should understand that many people involved in the home buying transactions have a vested interest in convincing you to buy.

People like real estate agents, mortgage lenders whose livelihood depends on this business and people like you are purchasing homes, might give you the wrong idea about why you need to purchase a home.

What a mortgage lender is willing to lend you and tells you you can qualify for might be very different from what you can actually afford.

Incorrect Logistics

When you purchase a home, you’re also buying into the community, the neighborhood, the commute to your job and all its amenities. See if all the logistics work out for you. While a drive for an of the office may not seem significant as compared to owning a home in a nice locality and at a good price, it may soon get to be tiresome and may make you tire of your commute, your job and your new home. Take your time and consider all important factors that are going to affect your life by purchasing the home.

Need To Borrow More Than You Can Afford

Spending more than you can afford when buying a home can be a very costly mistake indeed. Many people over estimate the amount they can afford because they have been renting at a lower cost and spending money on comfort and leisure activities.

When it comes to purchasing a home they usually borrow to the maximum limit and overextend themselves. Many people also believe that sum of money that the mortgage lender is willing to qualify them for is the amount that they can afford to borrow. This is not always true,

Rent not buy

Borrowing Less

Just like you can overspend and overextend yourself when buying a home, many people can also make the mistake of borrowing much less than what they can afford.

Take the example of someone who borrowed less than half of what they could actually afford to pay on a mortgage and purchased a home knowing well that they will need to move into a bigger place soon into the future. Having to relocate and purchase another property soon eats up into the equity of your current property. Selling and buying a home both cost money.

By the time you have paid for the costs of selling your house and purchasing a new one, you have probably lost all the equity that you built up in your home and maybe even your down payment.

It is said that you need at at least 3 and preferably 5 years just to recover that you are going to have to spend in selling and buying a new home.

Peer Pressure

Do not buy a home simply because it seems like the mature thing to do.

You might feel a lot of peer pressure to purchase home if your siblings, coworkers and your friends are all homeowners. Buying a home reflects on the financial security and success of a person. All said and done, it is a major milestone in a person’s life. However, you should realize that everybody has different needs and not everyone should own a home and certainly not at every point in their adult lives.

A study even supports the notion that the life of a typical renter is in some ways better than that of the average homeowner. Here are some of the results of the survey conducted with thousands of people.

  • Homeowners are less social on average than renters and spend less time with friends, neighbours and coworkers.
  • Homeowners spend more time on household chores.
  • Perhaps for the above reasons, renters have more sex and less marital discord and cope better with parenting that homeowners do.

Fear Of Escalating Prices

It is a common fear and maybe even justifiable that the escalating home prices will make it impossible for you to buy a home in the future if you do not buy one today.

Escalating house prices scare many renters and make them feel like they should purchase a home as soon as possible. News of booming housing prices make front page news and are often boasted about by existing homeowners.

The truth is that never in the history of real estate business have the prices become so high as to price number of people out of the market.

In fact if the home prices or on a peak now, you can be rewarded by being patient and wait till the market prices stabilize or even decline.

It is extremely important to understand that while you might not be completely locked out of the housing market by escalating prices, the price of homes are likely to increase faster than the rate of inflation. This means that you will be able to buy less home for your money in the future then you could today.

Not Knowing What You Can Afford

When it comes to purchasing the home you need to consider and examine your overall financial situation and goals. People usually have many financial needs and requirements that they want to fulfill such as saving for retirement, paying for children’s college education etc. which need to be figured in the decision of purchasing a home.

Don’t expect your house agent or mortgage broker to bring this issue to your attention. They might be motivated by their own vested interests or are simply not trained to look at this aspect accurately.

Evaluate your finances carefully before you make the decision to buy a home.

8 Reasons You Should Buy And Not Rent A Home

why buy and not rent a home

Don’t Rent Because It Seems Cheaper

Should you rent a home instead of buying simple because paying the rent seems so much cheaper compared to the cost of home?

It could be making a common mistake renting a home instead of buying one simply because renting seems cheaper. 

When you go out today to look at the prices of homes, you are likely to find it in the range of several hundreds of thousands of dollars. Your rent may seem insignificant compared to this cost. However, you must stop to consider your monthly renting expenses to your monthly cost of owning a home.

Typically speaking, you save money in the long run by buying a home rather than renting a comparable home today. One of the reasons is that all the costs associated with renting home are affected by inflation.

At a modest inflation rate of 5%, you rent will more than double in the next 20 years.

The prices of real estate are rising and not in tandem with the increase in income for most people. You will be able to buy ‘less’ home for the same money in the future than you could today.

In some areas the prices of homes are rising so fast that it makes sense to purchase a home as soon as you can.

To compare your rent to a mortgage loan, for the same monthly payment, you can typically afford a home loan that is 200 times the rent.

So, for example, if you are paying $1000 per month as rent, you can afford to take a home loan of 200 * $1000 = $200,000. You will still be paying the same amount every month.

Not only will he or prices become unaffordable in the near future because your income will not keep pace with the rising real estate prices but you also stand to make an extremely good return on this investment.

If the value of your home grows fast, your home is going to be an extremely valuable financial asset as well as financial security. You should understand that your decision to rent versus buy a home will affect your housing cost, not just this year but also for many years and decades to come.

Buy not rent

Not Buying A Home Because of Job Insecurity

The biggest chief executives of companies, athletes and even movie stars are insecure about their jobs. Being insecure about your job is quite natural. Job loss fears can easily make you insecure about buying a home if you take on the obligation of paying of a monthly mortgage.

  • The truth however is that a majority of people should not worry about job loss when it comes to buying a home.

This does not mean that you will not lose your job but within a reasonable time giving your skills and abilities you are likely to find another job and be able climb back on your feet in a comparable career position.

  • The current economic scenario might make people even more insecure about their jobs and financial stability in the future. But if you start working towards it today by saving money and not living beyond your means, purchasing a home should not be as much a problem as you might make it out to be.

Many people who had to face foreclosure when the real estate boom ended, had to do with people purchasing beyond their means and spending more than they earned. Living on credit has always been dangerous and if you want to figure in the factor of purchasing a home in the near future, you need to start planning for it.

  • The key here is to save. You need a cushion of 6 months of expenses at least, so that even if your job is gone, you have plenty of time to stay afloat, keep making your mortgage payment, and get a new job.
  • However, if you think losing a job is a high likelihood and especially if you need to relocate for a new job, you should consider postponing the decision to purchase a home until your employment situation stabilises.

Cannot Find The Right Home

Are you renting because you cannot seem to find your perfect home? Yes, its true that it takes time to find the home you want. But please ensure that you expectations are realistic. If you cannot find find the right house because the ones that you want are always too expensive, you may need to revaluate your requirements.

Look harder. It takes time and perseverance to find a home you want. So make sure you are really looking.

Mostly everybody buys a home at some point or the other. However, not at every stage and at any given point of time in their lives.

Less Than Paying Rent

The main advantage of the home ownership should be that it should be less expensive than renting. Many people do not stop to consider this but there is a simple calculation that you can use to compare the amount of rent that you are paying and and the amount of home that you can purchase with the same monthly expense.

The simplest way to calculate this is to multiply your monthly home rent by 200. The figure that you come to is the value of the home that you can afford to purchase by paying the same amount as your monthly rent as your monthly mortgage installment. Your monthly rent might seem extremely cheap as compared to the price of purchasing a home. But once you do this simple calculation, it might not seem so cheap anymore.

For example, let us say that you are paying monthly rent of $1000. When you multiply $1000 with 200 you get the amount of $200,000. So typically, you can afford to purchase a home for $200,000 instead of paying a rent of $1000 per month.

Do not forget the fact that when you own the home, even if the mortgage payment is higher than renting, the payment is going towards making you the owner of a great financial asset that will appreciate in value over the years. The built up equity in the house can be a valuable source of money when you need it for important purpose or make you life after retirement all that more comfortable.

Beat Rising Inflation

Another advantage of owning a home is that major cost of home ownership which will be your monthly mortgage payment, is not affected by the inflation rate.

That is, if you have a fixed-rate mortgage where the monthly payment is locked for the entire duration of the loan. As long as you keep renting a house, all the costs associated with the home are liable to increase with inflation including the monthly rent.

Taking a moderate inflation rate of 5% per year, a rent of $1000 per month with more than doubled in 20 years. And so will the prices of the homes. 

In fact, you might quickly find that the prices of the home have gone beyond your reach in the next few years. By purchasing home, you are safeguarding yourself from the rising inflation costs. You should also note that home prices tend to increase at a faster rate than the inflation.

So in the future you are likely to be able to purchase ‘less’ home than you could today for the same amount of money.

Consider when you are middle-aged or looking at retirement. Do not underestimate the number of years of housing you need because the US health statistics indicate that at the age of 50 you have a life expectancy of nearly 30 more years. And at the age of 65 you can expect to live for nearly 20 more years. By purchasing home and using a fixed-rate mortgage, you are securing your housing expense against inflation and fluctuation in the future. If you continue to rent, these costs will increase.

You are always going to need a place to live. Over the long-term inflation has almost always been around.

Even if you have to stretch yourself a little bit today to purchase a home, in the years ahead you are going to be glad you did it.

The danger with renting long-term is that all of your housing costs increase over time. This does not mean that everybody should buy because of inflation but if you are not going to buy now then you at least need to plan for the future carefully. You need to prepare for the rising housing costs. Housing in prime locations and major residential areas is only going to get harder and more expensive to find.

Avoid Unpleasant Landlords

One of the great advantages of owning your own home is that you do not have to deal with unpleasant landlords. 

The problem with many landlords is that they are slow to make expenses on property maintenance and improvements. 

While the smarter landlords realize that by up-keeping their property and maintaining it will attract better tenants and a better rent, several are of the mentality that they can maximize their profit by being stingy about the maintenance cost.

However, when you own your house, you will be completely responsible about finding responsible and good contractors to do any repairs and improvements in your house.

While you can bring about any changes like changing the floors, paint on the walls, modernizing your kitchen and bathrooms, you will have to undertake the job of managing all this yourself.

As difficult as it is for landlords to find good tenants, it is probably just as difficult to find good landlords. 

Apart from being problematic as far as spending money on property maintenance and repairs is concerned, the landlord may decide to sell the property and force you to move.

For this reason it is important to include a clause in the lease contract that guarantees user the right to renew your annual lease for a certain number of years even if there is a change in the building ownership. Unless the landlord is already expecting to sell the property, he should be delighted in knowing that you are expecting to stay for some time and he will not have to look for new tenants in the very near future.

Make The House Your Own

The great relief of owning your own home is that will you can do whatever changes you like. Many people do the same when they rent the home but this is not usually recommended.

Any improvements that you make on a rented property costs you time and money and benefits the landlord financially. If you can convince your landlord to take on the expense of repairs and improvements at their expense then great. Otherwise spending on a rented home might make you happy during the time that you are living there but will end up as a loss to you and gain to the landlord once you have to move. When you have a place of your own you can do anything and everything like putting in hard wood floors, changing the carpeting, changing the paint the walls etc.

When you own the home and you want to make changes, keep 2 things in mind.

Do not make the house too strange.

If you need to sell your house in the future, the more strange and outrages you made it, if you buy as it will appeal to. For this reason focus on the improvements that add value to the house such as skylights, a deck for outdoor living area, updated kitchens and modern bathrooms and so on.

Do not overextending your finances.

It is a very common reaction would people who purchase their homes to get excited and want to do several new things to make their homes more attractive and habitable. However, you should take a deep breath and give yourself some time to settle down before you do any major remodeling or changes in the home. Changing, improving and remodeling is going to cost money. Never lose focus of other important financial goals such as saving for retirement, children’s marriage or college education. When deciding to spend on renovation on the home spending more than what you can afford on your home can not only interfere with other important financial goals but also get you into significant debt and even build up high interest consumer debt as a prelude to bankruptcy.

Disadvantages of Buying a New Detached Single-Family Home

After the advantages, lets look at some of the possible advantage of buying a detached home.

You might not always get what you see

It often happens that many prospective homebuyers who go to see the housing being constructed by a certain builder are shown beautifully decorated and furnished homes. It is common for builders to spend thousands of dollars in decorating a model home in order to lure potential homebuyers to purchase.

You find modern appliances, beautiful furniture, window coverings, fireplace finishes, landscaping and many other features that you might desire in your home. Most importantly, all these extras make the place look like your dream home.

Detached new home

At this point of time you should get a very clear statement from the salesperson regarding which of the amenities and features that you are seeing in the model home are included in the sales price of the home.This is extremely important because many homeowners end up spending several thousands of dollars more off to having purchased the home in trying to make it look like the model home that they saw.

Prices are less negotiable

For upcoming homes that are being newly built, the builders are usually much more frigid wind comes to negotiating over the sales price. This becomes even more difficult if the housing happens to be in an area that is highly in demand or being built by builder who is popular.

The builders do not negotiate over the sale price of the homes that are coming up in order to maintain the integrity of the project. If they cut the prices for one customer, pretty soon that can have a rippling effect.

Other buyers will ask for a similar discount and before you know it the value of the homes in that project have come down. In fact, a builder slashing the prices for the homes for sale is a warning sign that may point out that the project is in jeopardy. These builders also may offer to throw in extras such as upgrade on furnishings, better kitchen appliances and a superior finish to your interiors.

Some builders also attract potential homebuyers by selling the home close to the actual building cost and pulling in a huge profit by selling extras and upgrades.

You should carefully look at the expense of buying items for the home from the builder himself even though it might seem like the easiest and the most convenient thing to do because you don’t have to go shopping for those later on separately. You might be able to save some money if you can get a better deal on home appliances, furnishings and other interior embellishments from elsewhere.

New homes might be more expensive than older ones

This is no surprise since the cost of construction, raw material, labor and professional expertise has gone up over the past several years. many builders will also look to charging a premium for providing a modern and new housing set up as they know that it will be preferable to older homes to many potential home buyers

Newer homes might not be built in as prime locations as older homes

It is an obvious fact that builders are running out of prime locations in popular cities and towns as the years go by. The land that was available in the prime and budding locations of the city 10 years back has long since run out. The newer homes that are built are either built further away from the main city or in certain undesirable locations such as landfills, steep hillsides etc.

If you want to locate yourself in an extremely prime location in your city, you might not have an option other than to buy an older existing home or apartment. As time goes by however, the location that is not considered to be prime and worthy now might become more in demand as the land needed to build for the homes become lesser in the future.

New homes may have hidden operating costs

1st of all, you should consider the various amenities and features that your new home has that might require higher maintenance costs in the future. It is nice to have a swimming pool and tennis court in your home but you should figure in the amount you would have to spend to maintain the same as well.

If your home happens to be a part of a housing society, there are probably going to be a society maintenance charges as well for maintaining the overall society, clubhouse, swimming pools, gymnasium etc. Some housing societies keep their monthly charges for the home owners low but then slap them with a special valuation of the repairs required for repainting the clubhouse or some such expenditure.

If your house happens to be a part of the housing society, take a careful look at the format they used to charge the society maintenance fee and whether there is a clause for paying a higher sum of money sometime in the future when additional expense is required.

Second thing to watch our for when living is a housing society is that there might be certain amount of restrictions as to the kind of modifications you can think about in your home. For example, the society might not permit certain kind of colors that you can use to paint the exterior of your home in order to maintain the overall look, feel, standard and overall value of the homes in the society.

You might not be allowed to use your own house broker

Builders usually have their own sales staff to handle potential homebuyers. They have their own contracts and sometimes also require you to deal with their agents and brokers rather than have one of your own. This is usually not never see able and if you are not comfortable with this then your only option is to walk away from the deal.

However, an alternative to this is that you at least use an independent appraiser to appraise the value of your home and have your contract reviewed by a real estate attorney of your own choosing. This will offset some of the disadvantage of not being able to use your own broker and safeguard you against the commonest pitfalls that a a person can make when buying a home.

It is always good to look at a certain situation from all perspectives. While buying a new home has its advantages, it is obvious that it has its disadvantages and potential for pitfalls as well. Just because a home is new does not mean that it is going to be without flaws.

Homes are built by people and human error is always possible. The intention of the builder is also very important. He should not be the kind of person who is tempted to cut corners to maximize their profit. On the other hand, there are good builders and those who are simply just not as good at their jobs.

Therefore if nothing else, even a brand-new home should be thoroughly inspected by a professional property inspector to discover these possible human errors before you purchase it. Believe us when we tell you that this is important and only a professional and a competent property inspector might be able to point out certain flaws that might be a deal breaker in purchasing the home.

These flaws in the property will probably never become obvious to you even if you make a great effort in inspecting the property yourself until it’s too late.

Benefits And Disadvantages of Buying A Brand New House

Advantages Of Buying A New Single Family Home

We are now going to talk about choosing different kinds of home to buy when it comes to making the choice. The three common kinds of housing that you can pick up to stay in:

  • A detached family home,
  • a condominium
  • and a cooperative apartment.

Different people might have different definition of what kind of a structure they associate with what they think of a home. If you have always stayed in busy metropolitan city, the odds are that you have stayed in an apartment in high-rise multi-story building.

However, if you have been raised in a suburb or in a smaller town, then your idea of a home might be the kind of place where you have a garden all around the home, windows looking out on a lush green patio or the backyard.

These kind of residences are known as a detached single-family home. This is because these kind of homes are not attached to any other home and are located on separate pieces of property and land. In this post we are going to discuss the advantages of choosing a new detached single-family home to buy over other kinds of property.

Detached single-family homes come in two basic types:

  • new homes and
  • used and previously lived in homes.

Advantages of buying a new detached single-family home

Detached single-family home come with their own set of advantages. They are as follows.

A newly constructed home is more suitable to modern day needs

A home that has been recently built is likely to have the modern amenities as well as features that the modern consumer desires. There is likely to be ample lighting, electrical outlets, provisions to put all modern appliances as well as modern furniture.

The kitchen will probably have the kind of set up where you can put in a dishwasher, microwave and fit in a refrigerator as well. The bathroom will have adequate lighting and multiple outlets to plug in your electric shaver’s etc.

The living room and the bedroom again will be able to accommodate all your modern gadgets such as your Internet connection, your laptops, DVD players, wall mounted televisions etc. You will also find it more convenient and easier to rig up your phone connection, fax machines and so on.

Since a certain amount of planning is going to go into building a new home to accommodate the needs of the modern homeowner, the entire setup will end up being much more neater. You will not have to deal with making cable modifications, using extension cords etc. to accommodate all your gadgets.

Compliance with Federal Safety and Environmental Standards

The newer built homes and are more likely to comply with the latest federal guidelines of safety regulations regarding fire hazards, electricity connection, plumbing extra. There is also going to be the least likely chance of use of hazardous materials that has been banned such as asbestos, lead based paints and other toxics substances.

The house is also more likely to be built according to other safety and environmental codes and safeguarded against natural calamities like earthquakes, floods, heavy rainfall, snowstorms etc. It is likely to be better insulated and offer you more savings on power consumption.

Cheaper to operate and maintain than an older home.

Just like new car, a new home is also likely to cost you less to operate and maintain at least for the first few years since everything is newly built, you will not have problems with plumbing and fixtures as you might with an older house that requires these things to be either repaired, replaced or maintained.

Also, the new home is more likely to have energy efficient systems in place such as more efficient heating and cooling, modern plumbing and electricity supply. You’re likely to have energy efficient appliances with proper insulation in the house that save your money on the power consumption bill.

The one thing to keep in mind is that the quality and the overall standard of a newly built home is greatly dependent upon who has built it. If the builder is reputable and has a record of building good-quality houses that do not cause homeowners problem for years, then it is a good buy.

However, if you find out that homeowners staying in old developments by that same builder are having problems, then you might want to reconsider. You should inquire into the reputation and the user experience of other home owners of the same builder before you close on the purchase.

You should find out if the builder finishes the construction on time, honors all contractual obligations including the completion of any unfinished construction and whether he cooperates with fixing any defects that occur later on. Find out if any previous homeowners had to take legal action to get the problems corrected. Another good sign of the popularity of the builder is how quickly the housing built by him gets sold and how much that property appreciates over time.

benefits of buying a brand new home

Disadvantages Of Buying A New Detached Home

After the advantages, lets look at some of the possible advantage of buying a detached home.

You might not always get what you see

It often happens that many prospective homebuyers who go to see the housing being constructed by a certain builder are shown beautifully decorated and furnished homes. It is common for builders to spend thousands of dollars in decorating a model home in order to lure potential homebuyers to purchase.

You find modern appliances, beautiful furniture, window coverings, fireplace finishes, landscaping and many other features that you might desire in your home. Most importantly, all these extras make the place look like your dream home.

At this point of time you should get a very clear statement from the salesperson regarding which of the amenities and features that you are seeing in the model home are included in the sales price of the home.This is extremely important because many homeowners end up spending several thousands of dollars more off to having purchased the home in trying to make it look like the model home that they saw.

Prices are less negotiable

For upcoming homes that are being newly built, the builders are usually much more frigid wind comes to negotiating over the sales price. This becomes even more difficult if the housing happens to be in an area that is highly in demand or being built by builder who is popular.

The builders do not negotiate over the sale price of the homes that are coming up in order to maintain the integrity of the project. If they cut the prices for one customer, pretty soon that can have a rippling effect.

Other buyers will ask for a similar discount and before you know it the value of the homes in that project have come down. In fact, a builder slashing the prices for the homes for sale is a warning sign that may point out that the project is in jeopardy. These builders also may offer to throw in extras such as upgrade on furnishings, better kitchen appliances and a superior finish to your interiors.

Some builders also attract potential homebuyers by selling the home close to the actual building cost and pulling in a huge profit by selling extras and upgrades.

You should carefully look at the expense of buying items for the home from the builder himself even though it might seem like the easiest and the most convenient thing to do because you don’t have to go shopping for those later on separately. You might be able to save some money if you can get a better deal on home appliances, furnishings and other interior embellishments from elsewhere.

New homes might be more expensive than older ones

This is no surprise since the cost of construction, raw material, labor and professional expertise has gone up over the past several years. many builders will also look to charging a premium for providing a modern and new housing set up as they know that it will be preferable to older homes to many potential home buyers

Newer homes might not be built in as prime locations as older homes

It is an obvious fact that builders are running out of prime locations in popular cities and towns as the years go by. The land that was available in the prime and budding locations of the city 10 years back has long since run out. The newer homes that are built are either built further away from the main city or in certain undesirable locations such as landfills, steep hillsides etc.

If you want to locate yourself in an extremely prime location in your city, you might not have an option other than to buy an older existing home or apartment. As time goes by however, the location that is not considered to be prime and worthy now might become more in demand as the land needed to build for the homes become lesser in the future.

New homes may have hidden operating costs

1st of all, you should consider the various amenities and features that your new home has that might require higher maintenance costs in the future. It is nice to have a swimming pool and tennis court in your home but you should figure in the amount you would have to spend to maintain the same as well.

If your home happens to be a part of a housing society, there are probably going to be a society maintenance charges as well for maintaining the overall society, clubhouse, swimming pools, gymnasium etc. Some housing societies keep their monthly charges for the home owners low but then slap them with a special valuation of the repairs required for repainting the clubhouse or some such expenditure.

If your house happens to be a part of the housing society, take a careful look at the format they used to charge the society maintenance fee and whether there is a clause for paying a higher sum of money sometime in the future when additional expense is required.

Second thing to watch our for when living is a housing society is that there might be certain amount of restrictions as to the kind of modifications you can think about in your home. For example, the society might not permit certain kind of colors that you can use to paint the exterior of your home in order to maintain the overall look, feel, standard and overall value of the homes in the society.

You might not be allowed to use your own house broker

Builders usually have their own sales staff to handle potential homebuyers. They have their own contracts and sometimes also require you to deal with their agents and brokers rather than have one of your own. This is usually not never see able and if you are not comfortable with this then your only option is to walk away from the deal.

However, an alternative to this is that you at least use an independent appraiser to appraise the value of your home and have your contract reviewed by a real estate attorney of your own choosing. This will offset some of the disadvantage of not being able to use your own broker and safeguard you against the commonest pitfalls that a a person can make when buying a home.

It is always good to look at a certain situation from all perspectives. While buying a new home has its advantages, it is obvious that it has its disadvantages and potential for pitfalls as well. Just because a home is new does not mean that it is going to be without flaws.

Homes are built by people and human error is always possible. The intention of the builder is also very important. He should not be the kind of person who is tempted to cut corners to maximize their profit. On the other hand, there are good builders and those who are simply just not as good at their jobs.

Therefore if nothing else, even a brand-new home should be thoroughly inspected by a professional property inspector to discover these possible human errors before you purchase it. Believe us when we tell you that this is important and only a professional and a competent property inspector might be able to point out certain flaws that might be a deal breaker in purchasing the home.

These flaws in the property will probably never become obvious to you even if you make a great effort in inspecting the property yourself until it’s too late.

3 Golden And Simple Rules For Buying The Right House

Three fundamental principles for selecting your home.

There are three fundamental rules that one should try and adhere to when selecting a home to purchase. These are not hard and fast rules and exceptions do exist.

The principle of progression: Buy one of the cheaper homes on the block

You will be advised by certain professionals such as real estate agent or the property appraiser that it makes more sense to buy the cheaper homes on a certain block. This means that if you are getting a home in a certain area where all the rest of the other houses are priced much higher than what you are getting your home for, then it is likely to be a good and profitable buy.

3 simple rules of choosing the right house

For example although the homes in that neighborhood are in the range of $200,000-$225,000, you are getting to purchase a home in the same neighborhood for $165,000. This usually means a good deal for you because anytime that you want to sell in the future, you are likely to get a much better price.

In a nutshell, the value of the homes and properties around your house which are more highly priced tend to pull up the price of your property as well. However, things may not be exactly as they seem to be. There might be a good reason why the home you are getting is valued at a lower price. So before you pull out the checkbook and make the payment, look at the property carefully and have it deftly appraised.

It is possible that the property is going for a cheaper price because it has certain defects.

  • Curable defects. When a property has defects that are mostly cosmetic and minor in nature, they are known as curable defects. This means that even though you have to put in extra money to bring the property up to a certain mark and standard, it will still be a deal and cost less as compared to the prices of the property existing in the same neighborhood.

    Let’s say that the property only needs a good paint job or a little bit of landscaping to make it livable. Perhaps it means repairs like replacing of the floorboards or addition of certain facilities like lighting fixtures. If you have to put an additional $20,000 in a curable defects for a home that you are getting for $165,000, the purchase of the home still costs you $185,000 which is a deal as compared to the price of the home’s existing close by which range between $200,000-$225,000.

    Problems in the property such as small deficiencies you can cure by upgrading, repairing or replacing in an inexpensive manner are known as curable defects. These include painting, modernizing a bathroom or kitchen, installing new counters and cabinets and upgrading electrical systems.
     

  • Incurable defects. Another reason why you might be getting a property at a cheaper price as compared to the neighboring houses is that it might have some serious problems which are not so easily fixed. For example the property might be located next to a garbage dump or might be really ugly. If you have to spend another hundred thousand dollars in replacing the foundation, putting in a new plumbing or complete rewiring, purchasing such as the property doesn’t make sense.
    Serious deficiencies in a property like this are called incurable defects.
    They are not feasible to correct if you want to maintain a semblance of order in your home affordability. Not only will it eat into your financial resources but will more than likely make you end up owning the most expensive house in the neighborhood which is never really good in terms of recovering the money that you’ve spent one it comes to reselling the home.

This does not mean that all rehabs are to be frowned upon. You just have to get into a more careful analysis of several factors and how it is going to affect the prospect of getting your money back when you sell in the future.

There is a benefit in renovating cheaper homes as long as you’re getting it for a price that is much less than the prevailing value of the homes in the neighborhood. The amounts that you can spend on a home to rehabilitate it usually depends upon the difference in the price of the home that you purchase and the prevailing price of the average home in the neighborhood.

If you take the previous example in mind, buying a house for $165,000 where the prevailing market rate is $225,000 means that you can afford to spend no more than $60,000 to bring your home up to the prevailing standard set by the other homes in the neighborhood. This is because, staying within limit and carefully planning the rehabilitation of the home ensures that you get your money back when you resell the home in the future.

The principle of progression works well with the location principle when choosing a home. Buying one of the less expensive homes in a good neighborhood improves your chances of property appreciation in the years ahead and maximizing your return on the sale.

Principle of regression: Do not buy the most expensive house on the block

The principle of regression is completely opposite to the principle of progression. This principle states that when you buy the most expensive house on the block, you are likely to suffer when you sell the home in the future.

Just like the higher value of homes around the cheaper home tend to pull its value up, the cheaper homes around a very expensive home might tend to pull its value down. Another problem with buying the most expensive house in the neighborhood is that bringing any improvements in the home do not increase their value at all.

The value of the home is already high as far as the home appraisal is concerned because it is already estimated to be more highly priced than any of the other homes in the neighborhood. If you buy a home that is worth $200,000 in a neighborhood where all of the homes are around the $150,000 mark, putting an additional $50,000 to modernize the bathroom or putting in a new kitchen will not increase the value of the home to $250,000.

This is going to be a problem when you resell the house. While nobody will deny that you have indeed rehabilitated or improved the home by putting in a new kitchen, people are typically hesitant to buy $250,000 home in a neighborhood where no other house matches the same kind of quality standard.

When people want to spend $250,000 on purchasing a home they want to stay in the neighborhood were all near the homes are of the same standard as well.

Over improving a home by excessive improvements is a possibility and a trap that many homeowners have indeed fallen into. The money might be well worth the expenditure as long as you are going to stay in it and use the improvements you have made.

But it is a fact that most of the homeowners change homes twice or thrice in their lifetime.

While some people stay in the home for their entire lives, most of us change residences. The point is that the improvements might serve you well for as long as you’re staying in the home but when you try to sell the home, those improvements will not fetch you an extra price. The money that is spent on the rehabilitation goes to waste. This phenomenon is called over improving a property.

Over improving the property is not just applicable to the more expensive homes but can also happen when you buy it one of the least expensive homes in the neighborhood.

It is just a matter of controlling and evaluating how much you should spend it in fixing the home up. You should take a clear view of the kind of properties that exist in your neighborhood and the best time to do it is before you start the rehab work. If you are going to end up with the most expensive house on the block when you finish a project, it is usually advised that you should not do the project.

The principle of conformity: Unusual is usually costly

If you want to have a maximum chance of future appreciation of your home that you buy, you should typically conform in size, age and condition and style to other homes in your neighborhood. This is called the principle of conformity.

Buyers usually do not want to buy a home that sticks out as a sore thumb as compared to every other house on the block. This does not mean that your house should be identical to all of the houses in the neighborhood but should follow a certain pattern which does not make it stand out very overtly.

  • Size This principle suggests that your house should not tower the other houses on the block or vice versa. For a house is smaller than the surrounding houses, use the principle of progression as a guide to bring it into size conformity with the other houses and you will increase your homes value. On the other hand, if you increase the size of your home which is already larger than the existing houses in your neighborhood, you are not likely to add any value to the home as far as appreciation and resale value is concerned.
  • Age It is uncommon to see an older home in the middle of a row of modern houses. However, you can every now and then find a brand-new house located in the middle of older homes. A modern home will look out of place in such a neighborhood and will in fact not fetch a higher value when it comes to reselling the home.
  • Condition The coThe condition that your house is and will obviously have an effect on the resale value. If your house is extremely ill maintained and looks like a dump, it will not fetch a high price. Similarly, by being the best maintained home in the entire locality, you are not likely to increase its resale price either. Even if your home conforms to all of the houses in style you can still over-improve your home with the quality of material, workmanship and appliances in your home if all that greatly exceeds the prevailing neighborhood quality standards.
  • Style and Architecture This is not saying being that the architectural style of your house has to be like all the houses in the neighborhood but simply means that it should follow conformity principle to the general overall look and style of the housing in the neighborhood.

All this does not mean that your house is to be as bland or boring as every other house on the block. The warning sign in to watch out is when people tend to look at your home and think it’s weird, eccentric or feel that it sticks out like a sore thumb or is highly noticeable as compared to the rest of the houses in the neighborhood.

How To Select The Best Neighborhood To Buy A Home

When buying a home, most of the people have a limited amount of money that they can spend on a home. This means that you have to choose one set of advantages over another when it comes to deciding on the kind of neighborhood you want to live in.

For example, a neighborhood that has a good schooling system in proximity might not have such big and grand houses as compared to another neighborhood that is more on the outskirts of the city.

We have already mentioned good characteristics of a neighborhood. At the end of the day you will have to decide whether buying a home in a neighborhood that has good schools is more important to you rather than one that is nearer to the office and saves you an hour of commuting everyday.

how to buy a home in a great neighborhood

Different neighborhoods can be good and advantageous in different ways. The decision can be tough. Just prioritise what is more important to you.

Prioritize your requirements

When you are on a budget and can afford only a certain amount of home, you need to prioritize what requirements are more important to you. Do you want to live in a neighborhood that has great schools, or would you prefer to live in a smaller home that allows for easier maintenance and has outdoor activities available.

Do you want to stay in a more average community that allows you to buy a bigger home or do you want to stay in the heart of the city where you are close to the action day and night.

Do you want a family home or a singles pad that allows you to live your fancy free and footloose lifestyle. At the end of the day, you have to decide what need and what is more important to you.

Research and investigate the neighborhood

As we have already mentioned in the previous section, when trying to estimate the amenities and features of a neighborhood such as health of the local economy, presence of amenities such as parks and entertainment, school quality, crime rate and the stability of the neighborhood, you should do the research and try to find out as much information firsthand as possible. This information is available from several sources and can be tapped into effectively to give you a fair idea of the neighborhood.

Local resources. Check the local library and local chambers of commerce for more information on the neighborhood.

Talk to the people who live in the neighborhood. There can almost be no better source of information than getting information about a neighborhood from the people who actually live there and what they have to say about other neighborhoods that you are considering. People staying in a good neighborhood may be very keen to point out the parking problems, unfriendly and snobby owners as well as other disadvantages of the other neighborhoods that you’re contemplating.

Similarly, residents of a not so good neighborhood may tell you about the problems that they are currently facing and how their neighborhood is not so good as compared to certain other neighborhoods and how they wish that they could move to that particular area.

Renters are an invaluable source of information because since they don’t have a lot of money invested in their home, they are more candid about the shortcomings of a neighborhood and about their future plans of relocating to a better area. Of course, you can observe a lot yourself by driving or walking through the neighborhood at various times of the day and evening to see how charming the neighborhood stays throughout the day.

Get the market statistics from your real estate agent. Days on market statistics indicate how long an average home takes to sell once it’s put on the market for sale. As a rule, the faster the property sells the more likely it is to sell close to the full asking price. Quick sales indicate a strong demand for housing in that area which will be an advantage in the future when you are ready to sell. It will also lead to a brisk appreciation of your home value.

Get help from professionals. Speak to real estate agents, lenders and appraisers to compare the potential value of property in each neighborhood. You should understand that the real estate agent who is responsible for selling a couple of homes in a particular neighborhood may give you disguised information and may not be so forth with us to point out the defects of a particular neighborhood.

However, appraisers have no vested interest in a particular property. Appraisers can charge to analyze the neighborhood property values and pricing trends but are likely to give you a more accurate idea of what your property might be worth in the future and whether it is overpriced or underpriced currently.

It makes sense to spend a few hundred dollars if you’re going to spend hundreds of thousand dollars in purchasing a home, to get an un-biased professional opinion on the neighborhood’s property value.

What Are The Qualities Of A Good Neighborhood

One of the most important decisions that you can make when buying a home is to choose the neighborhood carefully. Buying a home in a good neighbourhood can have several advantages.

Different people look for different facilities and amenities in the neighborhood of their home. This depends a lot on personal need. It is uncommon for a certain neighborhood to have all the good characteristics. Thats why different people choose different kinds of places to live in.

For someone who has children, having good schools close by might be preferable option rather than somebody who is looking to retire and looking for a peaceful area. 

If you’re single and footloose and fancy free, your ideal neighborhood may be a downtown singles condo in a complex that is near to the heart of the city and the action.

The following are some sought after qualities of a great home locality and neighbourhood.

More Appreciation Of Home Prices

One of these advantages is that you can look forward to and appreciated home value in the future.

While you have to pay a premium to buy a home in a good neighbourhood, these costs can often be recovered when you sell your home. Home prices in good neighbourhoods tend to appreciate no matter what the condition of the real estate market is otherwise.

If price appreciation is important to you, this is an important point to remember. A currently good locality may not offer the best returns. The prices of a home in a neighbourhood that is upcoming in a good location may offer more appreciation in home value.

what to look for in a great neighborhood 

Economic health.

The economy of a particular community such as availability of jobs and growing opportunities tends to increase the value of a home in the future. Evaluating the job market and the overall economy health of a particular community and neighborhood will help you understand how a particular neighborhood is going to grow in the future along with the value of your home.

Amenities and Facilities

There are several amenities that might be sought after by a person in a place that one desires to live in. Good roads, lush green parks, ocean views, easy parking, proximity to schools, churches, shopping, places to eat, good transportation, playgrounds and recreational clubs are good examples.

The more of these amenities available, the more of a premium by price are you expected to pay to stay in that neighborhood.

Schools and College System

For a family who has school going children, having good schools nearby is an important factor for good neighborhood to buy a home in. People with children would be very concerned about the schooling system that is available in a particular community and neighborhood.

Choosing a good neighborhood is not always about appreciating the investment in your home, but also about choosing the right community background and environment.

Good schools produce good children which leads to a better community and development in the future. Do not rely on surveys or somebody else’s opinion when assessing the school quality but visit the school yourself and speak with parents and teachers in a particular community to get a first-hand view of the schooling system that is available in the neighborhood your are interested in.

Low Crime Rate

Most of the people today are concerned with the safety of their home and family as well. This is a well judged concern as crime rates in many parts of the country are high. As with choosing a neighborhood with quality schools, do not rely on hearsay or isolated newspaper reports. Communities compile crime statistics, generally by neighborhood. Call or visit the local police department, visit its website or check the towns reference library to get the facts.

Stability

You might wish to purchase a home in a neighborhood that is stable when it comes to changes and development. You do not want to purchase house in a neighborhood that is in a constant state of flux. This means that the neighborhood and the environment that you buy in into today may quickly change in the future.

For example, if you purchased your home because there was a lot of open space and parks around your house, it may quickly change if a multi-storied apartment building comes up in these open spaces. Check with the local planning department and a good real estate agent for the inside information on the future proposed construction projects and proposals in the neighborhood that you are considering to purchase a home in.

Pride of ownership.

The pride of ownership that the people take in their homes is going to determine a lot on how the neighborhood is maintained and shapes up in the future. If you drive through a particular neighborhood where people tend to take good care of their homes, you will be able to see it in the beautifully maintained homes and clean surroundings etc.

Property prices can decline when the homes in a particular neighborhood are no longer maintained and the neighborhood is full of houses that are in decay. Poorly kept houses, abandoned cars, owners that are not staying in the homes but renting elsewhere, high rate of vandalism and crime are all significant the neighbourhood is not being cared for and has the potential to decline further in the future.

Degradation of homes in an area is contagious and can spread from one home to another, quickly encompassing the entire neighborhood making a once good neighborhood decline into disrepair and one of low demand and real estate value.

5 Tips To Get Great Price On A Home

These are some great tips to get a better price when buying your home.

Buy a Neglected Property

There are times when you see ads in the newspaper that tell you that a property has been slashed in price by 15%. You can save $20,000 when you buy. Such ads may be put in the home owners themselves or by the real estate agents. Your first reaction might be to think that this sounds like a great deal. But perhaps you can better look after your interest by being cautious. Perhaps the property was overpriced before or perhaps it has some major flaws that make it a problem to sell.

It is not impossible to find a deal on a home where you pay much less than the fair market value. But in order to succeeded in this you either have to be just plain lucky or prepared to do some hard work of looking around and putting in an abundance of time and effort.

You can target a property that has not been taken care of and is underpriced for simply this reason. Sometimes the home owner and the agent do not take much care in putting in required repairs and maintenance which results in the market value of the home to be lower than other similar houses on sale. You can take advantage of such a property and save yourself some money.

The easiest repairs to implement are cosmetic repairs such as landscaping, repainting the walls, refinishing the hardwood floors etc. You should be careful when you come across such a property. You should ascertain that the property does not have any major defects or requires major repairs to be conducted. ]

If this is the case, not only will it take up a lot of your time but also may end up costing you more than you saved on the upfront cost of the home. Besides, you do not want to spend the next few months putting in repairs and fixing up the property in order to make it liveable.

This is where the assistance of a competent home inspector comes in. Have the property properly examined by a qualified and professional home inspector. Make sure that there not too extensive repairs involved or major changes with reconstruction work required.

how to get a good price when buying a home

Buy When The Economy Is Slow

Buying a home in an economy that is slowing down can be a great way to purchase a home at a bargain and throwaway price. When things are on the downturn in the economy, you might suddenly find that several houses are listed for sale and at a reduced price. For some reason, people are wary of making large investments such as purchasing a house or even buying investment funds from banks when the Interest rates are falling and the stock market index is on the low side.

Common sense should dictate that the kind of prices that you can get during this time will not be available when the economy is booming and surging ahead. However, a major reason why people are uncomfortable with making large investments at this point of time is because of job insecurity.

However, as long as you’re not buying a home for investment purpose, you are going to be a homeowner for several more years. If because of the slowdown there is a further decline in the value of the home, it is not going to effect you.

If the prices on the homes for sale are competitive now, and you can afford to make the payments on your mortgage loan then there is not much reason why you should hesitate to buy.

You will probably never get prices as good as this and will be glad you bought the home when the economy recovers and the real estate starts to pick up again.

People tend to panic when they loose equity in the home. It does not matter. It will only matter if you try to sell. As long as your home is your home, there is no cause for worry. The prices will come up eventually.

There are several factors that tend to correct the prices of real estate. There are several signs that you can watch out for that indicate that the soft prices on the forms available today might be on an upsurge in the near future.

  • Rising cost of renting, which may bring the cost of renting a house closer to purchase which will in turn make more people want to buy, creating more of a sellers market and increasing the home prices.
  • Cost of purchasing a home being almost same as renting a home in which case many more people will prefer to buy leading to a reduction in the available inventory of available homes on the market.
  • Number of homes available for rent and for sale becoming smaller, leading to more competition amongst potential homebuyers and thus pushing up the purchase price of the available homes.
  • Absence of major new housing projects coming up in the area leading to a higher demand for the existing housing units.

When the economy is experiencing a downturn and the prices on housing is low along with the interest rate on mortgage loans, this could be the best time to make a home purchase. As long as you are confident of paying your mortgage loan in the future, and don’t expect to sell the property in the near future, you have nothing to loose. You will be able to buy MORE of a home for a lesser price.

Find A Motivated Seller

Another way to take advantage of competitive home prices is to find of motivated seller. A motivated seller is a person who typically wants to sell his house quickly for any number of reasons.

  • He could be in a hurry to sell because he wants to purchase a new house and meets the proceeds from the sale of his existing house.
  • He might be shifting to another location on a short notice.
  • There might be some major changes in his life such as getting married which requires him to sell as quickly as possible.
  • The homeowner may also be facing financial difficulties forcing him to sell in order to avoid a short sale or a foreclosure by the bank on his home.

While sometimes, sellers will profess in an advertisement that they are in a hurry to sell, usually they withhold this information so that they do not loose the bargaining power. However, many personal homeowners will not mind sharing this information.

Also, real estate agents do not mind disclosing such information as they are more intent on making the sale than anything else. Knowing the reason behind the home owner selling the home can give you a slight advantage when it comes to negotiating a better purchase price. So feel free to ask for the reason of the sale.

Buy During Off Season

Like most businesses, even real estate has its peak periods as well as slow periods in an year.

By slow periods we mean a time in a year when not many buyers are looking to purchase a home. Different regions in the United States may have different times of the year in which the real estate sales are slow. However, holiday seasons such as the time around Christmas and Thanksgiving are typically slow for the real estate business.

When there are less buyers in the market, the competition for the available housing units is lower. Sellers may also offer bargains and sale prices on the housing units in order to attract more homebuyers. It is possible to take advantage of this and get the better price than you would in the peak season when multiple bidders are vying for the same property that you are.

Another time which could be slow moving time for the real estate market would be during the months of July and August when many families prefer to take a vacation. Also, the families who wish to purchase a home before the new school semester have probably already done so.

Similarly, people tend to not purchase a home during cold winters. Depending upon the area and the state that you living in the United States, the severity of the winters could last from a couple to as late in the year as April.

The real estate sales can slow down in the colder and northern parts of the United States till the month of April. Similarly, in the hotter southern parts of the United States, people might not be looking to purchase a home in the peak of summer and prefer to stay at home.

All these times that you can expect the real estate market to be slow, you can also expect to get a better price on the homes for sale. However, it is extremely important to note that many smart buyers will not put up their property for sale when the real estate market is going through a slow period. They will want to sell during the peak times when they can get the best price possible.

You should also know that the properties that are left for sale after the peak season may be the rejects that nobody really wants to buy and for good reason.

At the end of the day, you should not count on looking for a home only after the peak season is over. The best of homes may be gone by then. But this is something that you must keep in mind anyway.

Learn to Negotiate

As we have said several times before, you should not get too hung up upon the current price of the home and whether or not you can get a slightly better price a few months down the line. The important thing is to be able to find the home that you want and to purchases it at the price that you can afford to pay back in the future.

A small difference in the price that you purchased the home for will fade to insignificance after having owned the home for many years which is probably your intention.

One of the last points that we would like to make regarding getting a home at the fair market value is to be able to negotiate with the seller.

It is usually important to be in a position of strength in order to negotiate. For example, if it is a sellers market where several buyers are vying to purchase the same home as you, then you are likely to luck out with trying to make this reduces price. However, there are many kinds of negotiation possible and you may be able to get the seller to offer you a better price by simply being a nicer person.

Should You Buy When Home Loan Interest Is High?

We are often asked a common question: “Should I put off buying a home because the loan interest rates seem to be on the high side at the moment?”

Read about how interest rates effect home prices and what you ought to do.

It should seem logical that the interest rate on a home loan should impact the prices of homes as well. Having a lesser interest-rate can make a larger home loans more affordable.

Consider the following example. $100,000 at the fixed-rate mortgage interest rate of 6% will have a monthly mortgage payment of $600. At an interest rate of 10% of the mortgage payment increases to $878.

buy or wait when home loan rates are high

So it should be true that when the interest rate on a home loan is low, a borrower can afford to purchase the more expensive homes and seek and afford to borrow more.

However, this is not usually how it happens. In many parts of the US in the late 1980s and early 1990s the home prices experienced a downfall in spite of the fact that interest rates were also declining. Similarly even though the interest rates were becoming higher in the late 1990s, home prices are rising as well in many communities all across the country.

This is a clear indication that other factors influence the prices of homes as well. One of them is the fact that lowered interest rate on loans makes building housing at low cost possible as well. The supply and demand for housing which is connected to the overall economy health of the community also plays a large part. In times of economy boom, both the demand for housing and the interest rate on home loans can increase simultaneously. This is not uncommon and happens often.

The point is that if you are ready to purchase your home now, the interest rate on a home loan should not be a very significant factor specially if you are intending to purchase a home for a long time.

If you are purchasing the home as your regular home where you are going to stay for the next decade or so, you will have plenty of opportunity to refinance if the interest rate on a home loans and mortgage as happened to decreased substantially.

Also, the value of the home that you purchase is only liable to increase in the future which will give you the growth in your equity and make it easier to refinance as well.

Effect Of Availability of Housing On Home Prices

How Availability of Homes Affects Their Sale Price

All factors that affect the prices of real estate and homes in a particular area such as the availability of jobs are all tied to one ultimate factor which is the demand and supply it off the housing. The availability of housing in a particular area has a huge impact on the prices. Growing employment rate and growing population rate may still out to appreciate the value of housing prices if there is already an overabundance of available homes and real estate. Conversely, an area that has a low employment growth rate may still see a surge in the housing prices if the availability of housing complexes and real estate is on short supply.

Basically, this is a little like competition between different businesses. When the people wanting housing is more than what is actually available, there is going to be a competition for the same real estate which is likely to drive the real estate price higher. Having a look at the vacancy rate is a good way to measure how much demand there is for existing housing. The vacancy rate can be calculated simply by dividing the number of empty and un-rented rental units by the total number of rental units available. So for example if 50 rental units are vacant in town and 2000 total units are available, the vacancy rate is 2.5%, [50 divided by 2000].

When the vacancy rate is low, there is more competition for the available rental units which is likely to drive up rental rates as well as price of real estate property in the future. Having high rents on a property also makes renting unattractive driving people to purchase homes rather than rent.

Conversely, a high vacancy rate may indicate that more housing exists than the demand. Excess of rentals tends to depress the rent as landlords are trying to find tenants for the properties. All other things being equal, more than 7 to 10% and increasing vacancy rates are generally a sign which are bad for the real estate sellers but good for prospective home buyers.

Another way in which you can get an idea about the availability of future housing in a particular area is to see how many building permits have been applied for. You can have a real estate investor look into the number of building permits that have been applied for in the recent past. This can tell you about the trend of housing in that area for the future. For example, a lot of building permits filed might mean that the housing is going to be in abundance in the near future which will result in either no appreciation or even depreciation of home prices. This is because many builders usually get into a new housing market to capitalize on high rising prices. Such an increase of happens after a sustained rise in housing prices in a particular area and the subsequent growing demand.

Conversely, depressed prices or high cost of building can lead to little or new housing being developed.

The supply of housing is also determined in part by the amount of land that is available to develop. A limited supply of land indicates the trend of rising and appreciating real estate prices in the long run. Therefore prices of real estate has appreciated quite a lot in areas such as Manhattan, San Francisco and Hawaii because they happen to be surrounded by water. Conversely, home prices tend to rise more slowly where there are wide tracts of land available for development.