Buying a first home can be scary experience. Often buyers imagine the worst. Will I know a good house when I see it? What if I’m not able to re-sale the house that I buy? How can I make sure I’m making a good investment? What if I pay too much and home prices drop? How do I know that the market is going to stay hot?
After years of hefty home-price appreciations, it’s natural to wonder how long the good times will last. The truth is that real estate markets are cyclical – prices go up and they go down. On the bright side, over the long term, prices have tended to move higher in this country. While thinking of buying – especially in a “hot” market -take into account some of these factors to help you figure out if you should buy.
Length of Ownership
To protect yourself when you buy a home, adopt a long-range horizon. If you are truly worried about depreciation, then think more seriously about waiting to buy until you plan to hold the property for at least 5-10 years. This way you can ride out any downturns in the market and sell when the market improves. Try to avoid getting into a situation where you are forced to sell in a down market. If you are unsure about how long you might want to stay in the area, postpone your buying plans until you are more certain of where you want to reside.
Bigger is Better
For you to be able to hold on to your new home for the length of time it might take for the home to appreciate, you need to make sure that the home you buy will suit your long-term needs. This translates into: don’t buy a home that may end up being too small. Many first-time buyers make the mistake of buying a little starter home because it’s charming, it’s in the right neighborhood, or they think that’s all they can afford. But a one-bedroom condo on the fifth floor or a two-bedroom, one bath house on an itty-bitty lot does not leave a lot of room for growth. A better approach might be to buy on the outskirts of a prime neighborhood where you can buy a 3-bedroom, 2-bath home for the approximately the same price. You might not have the most prestigious address today, but you could experience good appreciation, and not only will it finance your trade-up move, you will be more comfortable in the mean time.
On the other hand, remember that when it comes to square footage, bigger does not necessarily mean better. A buyer might complain that they can only afford a 1,500 square-foot house in their price range, and while it’s nice to have more square feet to a certain extent, a well-designed 1,500-square-foot home can be a very comfortable place to live.
It’s true that some floor plans are better than others. Ideally, there should be good flow between the rooms, one that is conducive to your natural living habits. A home with a central hall that leads to many rooms is usually easier to live in than one that’s laid out like a train where you have to pass through one room to get to other rooms. Good indoor-outdoor living can also make a big difference. A deck or patio off the kitchen, family room or dining room provides additional usable space and makes the home feel larger.
In the end, don’t be scared! Some buyers put off their home-buying plans for fear that the real estate market will fall. The chances are slim and in fact, this seemingly sane strategy can be risky if prices don’t drop. Regret can kick in next year when the market appreciates and you haven’t bought, and additionally the home prices will be further out of reach. Then again, there’s usually no need to rush to buy in a market that’s bloated with inventory, particularly if new housing developments are in the works. Just remember that an oversupply of housing relative to buyer demand puts a downward pressure on home prices. Keep up with your research and plan accordingly.