Late June Real Estate Market Observations: (within is a discussion of ”Defining a Good Deal”!)

The real estate markets appear to be slowly normalizing, but it still is a strong buyers market with the elements of “The Perfect Rainbow” (a previous blog,) still very much prevailing.  It surely must be an historic “Good Time to Buy” period!  The national and local news media continue to report higher numbers of transactions, and we’re certainly noticing that locally.  Prices too are stabilizing, especially on the better options, and foreclosures are way down, especially locally.

So those factors in “The Perfect Rainbow”….

Great inventory from which to choose

• Still-incredible interest rates, but appearing anxious to rise
• Modest competition, but there’s more all the time!
• An “affordability index” at an all-time high
• A phenomenal $8,000 tax credit available for many of you – (“first time” buyers.)

(there’s a separate blog on this subject.)

We’ve mentioned many times that the good local markets in Metro East never ever were as “bad” as many parts of the U. S., and that’s a firmly-held observation.  The correlation is that the “bubble” was never as large as those “other parts”.   And we would like to claim an influence borne of careful buying, but we have yet to hear from a single former client that they’re enduring foreclosure.

And so market improvements appear to be real, and that comforts everyone.  We still think it takes careful attention to the principles of buying wisely, and of course, we’re prepared to help with that.

And on the subject of “buying wisely”, we’re observing an emerging market condition that could stand discussion.  It can make a difference to present and future buyers….is important for them, and us to understand. 

It’s a fact of this current market that the price-spread between high quality properties and lower quality, (because of condition and location, mostly,) is much, much higher than that which had been considered normal.  As we’ve discussed it in our offices, it’s really not hard to understand, but there’s a consequential buying lesson here, too…and a classic buyer’s trap.  

Buyers are simply being more discriminating, more careful in their comparisons.  And they are NOT taking on properties of lesser quality when they have better options.  And that “quality” relates to both the livability of the home as well as their resaleability, the latter often otherwise overlooked.

In the slam-bang years, buyers were overlooking more faults, but they aren’t nowadays, especially with our help and direction…for we are augmenting that critical focus if not insisting on it…and in fact, we always have.

But we also believe these “lessons” will be well-learned, and will become a part of our home buying culture for perhaps years to come…home buyers will be more critical.  And the spread of values (prices) between good and poor properties will remain larger.  And that means we need to prepare for these future buyers when we buy now.  And that’s good for the whole principle of “wiser  homebuying”.

This of course challenges the classic definition of a “Good Deal”.  We’ve always advocated that the quest for discounts alone was not necessarily part of the “Good Deal”.   In fact, I’d like to quote here from our long-standing principle defined in “Wiser Homebuying”.  Everything in this article from here to the end was written years ago and quoted word for word, but it still is truth, only reinforced by the current markets.  It includes the reference to the “traps”.

This if from “Buying Goals, the Quest for Discounts vs. Picking Cherries” “But most important: The quest for discounts in our opinion, is not the most important buying goal…that one is setting up the best resale possible (see the next page).    Worse, looking for discounts can often be competitive and even distracting.  Read on! 

B.   Picking  “Cherries”  There’s only one hard number that appraisers and realtors work with in evaluating homes….and that’s price per square foot.  In any category, homes are actually priced all over the place….above and below that average.   Homes above the average (we call them “cherries”) are there because of superior upgrades, location, setting, site, location, maintenance….many things.  Homes below the average are there because they don’t have these features. 

We strongly believe our buying goal should be to “pick cherries”…..pick the best home we can find in the category, with superior upgrades, location, setting, site, location, and maintenance, with resale all set up. To begin with, the “system” has already drawn the price of that home down to the average when pricing was defined.  The seller may still believe it’s worth more, hence carries strong reluctance to lower it anyway.  But if he gets a lot of interest in the home, and multiple offers, that resistance turns to cement.  On the other hand, homes actually below the norm (lacking all those good qualities) could easily be priced higher than they deserve; they’re drawn to the average, too, and their owners will support that pricing direction.  But if it doesn’t sell as quickly as he wants, or if he gets no action, and especially if he’s in a hurry, you may catch him at a time where he’ll consider a substantial discount.   You know what?   Big deal!  Even with a discount, it could still be a bad deal, especially if has one of those incurable diseases such as a bad location, a miserable floor plan, or any number of  things. The real points: Discounts are rare in “cherries”.  

Discounts and “cherries” are usually incompatible goals.   Discounts are largely not under our control.  Picking cherries is much more under our control (with your concurrence and teamwork). In fact, the quest for discounts, without balance, is a dangerous quest!  It’s almost classic misdirection, away from a longer term but more valid objective, to a get-it-now one.  The latter is okay when buying a truck, which is inevitably going to depreciate the minute you drive it off the lot.  But homes appreciate, and that’s a totally different game.  That makes it an investment, and worthy of a totally different set of standards.             A quest for “Cherries”, at a fair price, is a much more valid and enduring goal. 

            It’s no sin to pay a fair price for the perfect home, with resale set up.            It’s a serious sin to pay too much for a disadvantaged home… even if you get a discount! Any small discount you might leave on the table in an effort to button up the purchase of the home is inconsequential in the long run…consider it the hedge against the risk of losing the home in the first place. And the following is taken from our piece; “Mistakes That Buyers Make” 

3.    Approaching negotiations like you’re buying a truck.  The pitfall here is that you cannot let the short term quest for discounts cloud the much more important long term quest for appreciation, expanded in a previous section. Remember the two big differences.  A home is an investment, a truck is not.  There are many trucks you could buy, but there could be just one home that’s appropriate.  A home is a long term investment that should appreciate in value….like buying a growth stock.  A truck depreciates when you drive it off the lot….so it’s 1^st cost is a much bigger issue.        (To continue the analogy, if we consider the purchase of a home to be a purchase of a growth stock….then its livability is the “dividend” you might hope for during the holding period.   And that’s what were trying to do….long term and short term benefits; growth and dividends!)                                                      End of Quotations:  We hope this helps explain the phenomenon we’re seeing about price spreads, and helps set up a healthier buying attitude….we believe it to be a profound truth.   Of course we’ll talk about it openly when we see you. Merrill Ottwein

Foreclosures drop sharply in April in metro-east; experts hope the worst is over for homeowners

BY WILL BUSS - News-Democrat tool nameclose tool goes here The number of foreclosures filed in St. Clair and Madison counties dropped dramatically in April compared with the first three months of the year.Foreclosure filings dropped from 163 in March to 39 in April –a 76 percent decrease.In

What a pleasure it is to pen these more-optimistic comments!! 

Of course, you’ll recall the popular movie of a couple of years ago…The Perfect Storm!   It was an unlikely but memorable name…and The Perfect Rainbow is a lot easier to visualize!  And I’m not saying the storm we’ve been through was “perfect”, but rainbows always follow!

The fact is, the rainbow is up!  Real Estate Market conditions are immensely brighter and clearer than they were just a month ago.   It’s been a month of near-normal activity in fact.  We’ve had normal traffic…people coming and going all of the time…and continued competition for good homes.  It appears that buyers aren’t reading, (or aren’t believing) what’s in the papers anymore, they’re just out doing their thing.  It also appears they are understanding that all markets are local and can’t be generalized state-wide or certainly nationally.  And it appears the activity is across the board value-wise and necessity-wise; local people and relocation people alike.

And from all aspects, it could be called The Perfect Rainbow.  We don’t recall circumstances any more promising:

Surely we’re at, or close to the bottom of the curve.

• There’s great inventory from which to choose – an all time high, in fact.

• The values are stable and realistic – and not likely, it appears, to go lower.

• The competition isn’t yet outrageous, but building.

• Money is easily available, at all-time low rates, but rates appear ”anxious” to rise

• The “affordability index” is at an all time high.

• On top of all that, some of you are going to have this enormous tax credit of $8,000 available to you…that’s a huge cash payday…(for homes closing in 2009, 1^st time buyers.  We have a blog describing the requirements, under “Local Homes Markets.” 

  Of course we would more than ever recommend great care in buying; to minimize risks and maximize enjoyment and resale.   That’s where we come in.

And that is simply, The Perfect Rainbow, following a pretty darned ugly storm! 

Merrill

About the “Real Estate Tax Equalization Process”  in Madison

Recently, the owners of every parcel of real estate in Madison

First, this is in response to state-managed reviews, township by township, which claim that properties have been, on the average, under-assessed, hence the need for the adjustment, across the board to every parcel.  It’s a process that’s legally required in the state of Illinois “quadrennially”…every 4 years.  It’s performed under state supervision by the County

So what can one do?   The fact is, for this kind of assessment, not a lot.  Ordinary procedures for protesting individual assessments don’t apply here, although they might still be invoked if the overall assessment is simply deemed too high.  Ordinarly, these protests are made on individual parcels after the Assessor does his job and reports to the owner, where objections are somewhat easily filed with The Board of Review itself.  But this equalization process is not in that “ordinary” category. Here, the Board of Review is leveling the “Equalization Factor” against every single property; (In fact, The Board of Review by doing this is indirectly criticizing the Assessor as not having done his job properly…hence the need for the overall adjustment.)  And that makes a great deal of difference in how objections are made: Since The Board of Review is applying the state imposed “Equalization Factor”, an individual owner cannot file an objection with the local board for that reason.  It instead must be done directly with a state agency called, “The Property Tax Appeal Board”, (web site: www.state.il.us/agency/ptab, which web address is on the back of the card.) And the complaint there can only be with the “Tax Equalization Factor” set.  That agency is not prepared to deal with individual assessments otherwise.  In my mind, that makes it nearly impossible, surely improbable, for individuals to win, (visualizing Don Quixote’s “Windmill Tilting”.)   I anticipate that the local Board of Review would also discourage you from making this appeal. 

So this “bottom line”:  Individuals should work through the math and see how it affects them.  Take the assessed value after the equalization factor is applied and multiply it times 3, (because assessed values are 1/3 of real.)  Compare that number with what you’ve paid for the home, or what you think the home is really worth.  In the several cases I’ve worked through, these new assessed values, after “equalization”, are still a bit under the purchase price, making it difficult to lodge an objection.  However if the new assessed value is substantially higher, than I would still go to The Board of Review and file an appeal, (not for the equalization factor, but just because it’s overall, too high.)  You would then need to prepare a presentation for the Board of Review based on “comparables” (valuations of homes equal to yours,) in the ordinary way in which taxes are challenged.  We can help you with this. Sometimes, a “Realtor’s Opinion” will help, (but probably not ours, if we helped you buy the home.)  A purchased appraisal might also help.  We could help select that help. Your protest should be filed with the County

The following is a verbatim copy of an article that originally appeared in the wall street journal (in ‘Smart money’).  It’s presented here because it has good advice for 1st time home buyers, but it also, in paragraph 4, advises they should use an “Exclusive buyer agent”, and links to the national association of exclusive buyer agents, (in paragraph 4.) That’s significant because merrill was a founding member of this organization, its first treasurer and its fourth president.  (Also see “About us” for more detail.) 

Deal of the Day by Deal of the Day by Lisa Scherzer (Author Archive) 10 Mistakes First-Time Home Buyers MakeThe declining home values that are plaguing homeowners are just one of the factors creating an opportunity for prospective home buyers. Standard & Poor’s latest Case-Shiller index, which tracks home prices across 20 major U.S. cities, reported that values dropped 19% in January from a year earlier.Those depressed values, combined with near-record-low mortgage rates and government incentives (an $8,000 first-time home buyers’ tax credit included in the stimulus bill), are luring more first-time home buyers into the market. Indeed, a recent Century 21 Real Estate survey found that more than three-quarters (78%) of potential first-time home buyers say now is a good time to buy.If you agree, be aware that buying a home comes with plenty of potential missteps. Here are 10 all-too-common mistakes first-timers make.

1. Not knowing how much house you can afford.Many novice home buyers spend a lot of time researching homes – comparing kitchen layouts and backyard square footage – but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get pre-approved for a mortgage, says Claire Clark, senior vice president of business development at Prudential California Realty. Without first figuring out how much house you can afford, you risk falling in love with one you can’t.

2. Assuming foreclosures are great deals. Just because the previous owner owed $450,000 on a house before the bank took it over doesn’t mean it’s worth that much now. Values have slipped significantly, says Jay Michael, partner at Estate Property Group, a

4. Failing to find a good buyer’s agent. Landing a mortgage is tough these days. So buyers should rely heavily on knowledgeable agents to help them get their finances in order, says Michael. After all, buyer’s agents have a fiduciary responsibility to the buyer exclusively — and should be looking out for their best interests. Start your search at the National Association of Exclusive Buyer Agents, a nonprofit representing buyers (exclusively.) Or consider using an agent recommended by a relative or friend. Interview each candidate about their experience, if they’ve worked with first-time buyers before and what kind of service you’ll get from them.

5. Underestimating the costs of owning a home. Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many home buyers don’t anticipate the additional costs for repair and maintenance, or for an increase in utility costs, says Erin Baehr, CFP and president of Baehr Family Financial. Consider the age of your new home and how well it’s been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home’s purchase price annually for repairs and upkeep.

6. Failing to budget for property taxes.Property taxes – and the likelihood that they’ll climb over the course of your time in the house – should be factored into any home-buying budget, says Baehr. To get an idea of how much you’ll be paying, call the local assessor’s office or talk to people in the neighborhood.

7. Assuming your first offer will get accepted.As home prices get even more affordable, competition is bound to heat up. “You can’t assume you’ll walk in there, make the offer and get it,” says

8. Skipping the inspection.Before signing anything, hire a professional inspector, says Justin Lopatin, a mortgage planner with American Street Mortgage Company. The seller isn’t likely to tell you there’s mold in the basement or the walls are poorly insulated. Lopatin advises buyers to find and hire their own inspector – independently of the realtor – to ensure there’s no conflict of interest. (You can find inspection companies in the phone book, or by doing a simple web search with your zip code.)

9. Doing too much too fast. Some buyers want to make the house their own right away, says Baehr. They overextend themselves on credit to do so, and assume the improvement will pay for itself by increasing the home’s value. But that’s not always the case – especially in today’s market. Instead, buyers need to exhibit patience and make changes over time.

10. Failing to include a contingency clause in the contract.A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in under the purchase price. Should one of these events occur, the buyer gets back the money he used to secure the property. Without the clause, he can lose that money and still be obligated to buy the house, says Lopatin.(Corrected April 6, 2009: As originally published, we stated that a contingency clause protects home buyers if the appraisal comes in above the purchase price. In fact, protections kick in when the appraisal value is under the purchase price.)

Ah, the march of the seasons! No matter how many we’ve seen, it’s always a thrill. There are always a few tentative peeks into springtime, and always a few reminders that winter doesn’t give up its grip easily. Then the burst of blossoms and greenery that testify it’s finally real. In fact, it seems to get hot, quickly! It doesn’t take many days for us to wish for a cooler breeze on our faces.

The papers are still saying that this is a rough period for home buying and sales…and of course that’s true. (We wish however that it would not become such a prominent contribution to self-fulfilling prophecy.)

But there is a bit of good news creeping in, too.  The stats demonstrate that the sales-curves and the value-curves are getting flatter nationally, in the St. Louis area, and in southwest Illinois. Our offices as of this middle of April are approaching normal in traffic and it appears, in buyer confidence, a very important factor.  And our web sites are getting much more traffic. 

Our communities obviously are part of the nationwide picture, but we surely haven’t been on the worst end, or even average part of that spectrum. Stats are out for 2008 that indicate an 18% drop locally in sales volume from the year before, and a 2 or 3 % drop in average values.  Now 18% is significant, but it still means that 82% of the previous year’s volume was at least matched.  That’s not “dead” by any means.

It’s the impression that values are “way down” that bothers us.   The stats say the average values are “down by just under 3%,” which itself is not a really big figure, but that figure could be terribly skewed.  Let’s say that first time home buyers were a factor in 2008 (and they were) so that the volume of sales on the lower end of the spectrum was prominent.  That itself would lower the “average”.  

We do see a few cases of really soft pricing, (and long periods “on the market”) but those properties usually have other problems that our buyers aren’t going to want at any price.  Problem properties are definitely harder to sell nowadays, and they stay on the market a lot longer. When these sellers finally give in to these much-lower prices, that skews the averages a lot!

So we bristle a bit whenever we see the media report “big drops” in average price.  The “average” is simply not a good overall measure.  And it certainly doesn’t represent the mainstream locally.

That bias aside, we’re certainly seeing “stable” pricing on better properties.  That stability is good for sellers of course, but it’s good for buyers, too…because they want the future to remain stable, too.   So beware of “average” asking prices, too….also not a good measure of trends.)

We’re still counseling that it’s a good time to be a buyer, but that buyers can’t expect big discounts, either, (or won’t want those discounted properties.)  The rule, “It’s still not a sin to pay a fair price for a good home.”   Of course, we continue to advocate extreme care in their selection, with great attention to resale factors.  To wrap up this thread, we have recently even had a couple of cases where our buyers competed with another buyer, when we picked on a fairly-priced “cherry”, one of those ideal properties we look for.  The whole point; the market is more stable than “news” would have it, especially in our good local communities.  It’s a good time to buy, (carefully,) but buyers dare not have expectations of big discounts on the better properties, or they’ll miss them!

First time home buyers, and relocating home buyers are the most prominent in the market right now.  Buying is almost a “must” for relocating families, and first home buyers are really seeing that this is a good time to be a buyer, (and they have no home to sell!)  Any that don’t have to move, are still mostly waiting.

Builders appear to be a bit more aggressive this spring, too, so there’s some new-home inventory coming onto the market, much of it not listed. (We’ve recently had a couple of good buys in this category.)

So it is really a great time to be buying. The pricing, as stated, is “realistic”. Mortgage rates are incredible, and mortgage money locally is still more than available. Our local banks have weathered very well and appear normally healthy.

We do believe buyers need to use care and caution, and that’s where we come in, supporting the best decisions possible. Ironically, the two classes recited as being “prominent”, first home buyers and relocating families, are considered the most “vulnerable” to a lack of good representation.  The former because they haven’t done it before, and the latter, because “smart” and “experience” aside, they’re still unfamiliar with the buying climate in a new home town

With 2008’s records tabulated, our agency enjoyed a pretty good year.  Paul Ottwein received his 8^th straight high-production award, (making it a “Lifetime Award”.)  He was surpassed only by several teams, or by a couple of individuals winning not by dollar sales volume, but by listing volume, and specializing in low-priced foreclosures.  And he did that with only one side of every transaction!  The O’Fallon office was down a bit as fewer military families appeared to be moving around, and many moving looking at rentals, but the production was still respectable.  (Ironically, “Awards” have been discontinued in the Belleville Board of Realtors.)  Three of our agents, Denise Carter, Nancy Jo Mitchell and Paul Ottwein also won 2008 awards for “Highest Client Satisfaction”….by St. Louis Magazine.

Some new resources are available. The “Blog” section of our websites has postings on the market and the company, and this letter will be posted there for public viewing.  The “Blogs” are getting steadily increasing attention.)

Prominent is an article under “Philosophy” that tells about our new use of a Robert Frost couplet in our marketing.  We’ve used it internally before, but decided it may be better at claiming a difference (as in our brand of service,) than trying to do it otherwise.  It’s from “Two Roads in a Wood”.  It’s on the front pages of our web sites now, and the subject of the blog article.  It’s kind of the poetic version of “off the beaten track!”

We also have some copies of our first-ever, (and probably, last-ever!) “Newcomers’ Calendar”…”For the Fun of It”, (of living in Southwest Illinois.)  It’s less of a calendar than a short historical review of events important in southwest

Enjoy spring!

For many years, we’ve used a quotation from Robert Frost’s Poem, The Road Not Taken, but mostly on handouts within the office, especially the cover of our “Wiser Buyer Guidebook” passed out at orientation sessions.

On the other hand, we’ve searched for years for something simple that suggests that we’re truly different, which word itself, overused, says, “Yeah, sure!”

In a single memorable moment, a “Duh!” epiphany, we finally put this together, and have started using the last stanza from the poem in our literature, first on the front pages of our web sites.

It stakes a claim to “different” in language more dramatic than the oft-overused word itself, and is a rather poetic version of “Off the beaten track!”

It doesn’t necessarily say how we’re different, but it emotionally and dramatically claims that we are different…leaving it up to the reader to discover why and how.   And of course, it doesn’t take long in the body of the first pages of our web sites for us to tell them.

It promises to be helpful in dramatizing the facts, creating a bit of curiosity and intrigue, creating a more fertile field of understanding, planting a seed of uber-interest.

And then it suggests that they may want to ply this “less trod” path with us, sharing the adventurous courageous elements.  And that seems to be striking a chord.  All of us want to do things differently, to be smart about our decisions, to be courageous and adventurous.

So we’re having a good time with it, and so wanted to share this little insight with you.  You might have comments to us as to how it strikes you.

The following is paraphrased from Wikipedia on the subject, and recites the poem in its entirety at the end.

Robert Frost – The Road Not Taken

Interpretation

The poem has two recognized interpretations. One is a more literal interpretation, while the other is more ironic.Readers often see the poem literally, as an expression of individualism. Critics typically view the poem as ironic. – “‘The Road Not Taken,’ perhaps the most famous example of Frost’s own claims to conscious irony and ‘the best example in all of American poetry of a wolf in sheep’s clothing.’” And Frost himself warned “You have to be careful of that one; it’s a tricky poem – very tricky.”

Literal interpretation

According to the literal interpretation, the poem is inspirational, a tribute to individualism and non-conformism.  The poem’s last lines, where the narrator declares that taking the road “less traveled by” has “made all the difference,” can be seen as a declaration of the importance of independence and personal freedom. “The Road Not Taken” seems to illustrate that once one takes a certain road, there is no turning back. Although one might change paths later on, the past cannot be changed. It can be seen as showing that choice is very important, and is a thing to be considered.This interpretation is connected with misremembering the title as “The Road Less Traveled”, since it places emphasis on the choice made, not the opportunities foregone. 

Ironic interpretationThe ironic interpretation, widely held by critics, is that the poem is instead about regret and personal myth-making, rationalizing our decisions.In this interpretation, the final two lines:I took the one less traveled by, And that has made all the difference. are ironic – the choice made little or no difference at all, the speaker’s protestations to the contrary. The narrator admits in the second and third stanzas that both paths may be equally worn and equally leaf-covered, and it is only in his future recollection that he will call one road “less traveled by”.The sigh, widely interpreted as a sigh of regret, might also be interpreted ironically: in a 1925 letter to Crystine Yates of

The Poem

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.

With 2008’s records tabulated, our agency enjoyed a pretty good year.  Paul Ottwein received his 8^th straight high-production award from the Gateway Board of Realtors, (making it a “Lifetime Award”.)  He was surpassed only by several teams, or by a couple of individuals winning not by dollar sales volume, but by listing volume, and specializing in low-priced foreclosures.  And he did that with only one side of every transaction!  The O’Fallon office was down a bit as fewer military families appear to be moving, and those moving are looking at rentals, but the production was still respectable, (but “Awards” have been discontinued in the Belleville Board.) 

Three of our agents, Denise Carter, Nancy Jo Mitchell and Paul Ottwein also won 2008 awards for “Highest Client Satisfaction”….by St. Louis Magazine.)

We also have some copies of our first-ever, (and probably, last-ever!) “Newcomers’ Calendar”…”For the Fun of It”, (of living in Southwest Illinois.)  It’s less of a calendar than a short historical review of events important in southwest

FIRST-TIME HOMEBUYER TAX CREDIT

As Modified in the American Recovery and Reinvestment Act

Major Modifications Italicized

February 2009

The following article is quoted in its entirety.  It was written and published by Amy Hoak, in Market Watch, recently.

Could this actually be the best time to buy? It may be moment you’re looking for By Amy HoakMarketWatch CHICAGO—People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall.  But if you’re brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime. 

Ask for price reductions, improvements, closing costs—whatever—and the seller, desperately trying to get a contract, is very likely to work with you, said Jay Papasan, one of authors of the book “Your First Home.”  When the market starts improving, your negotiating power starts to diminish, he added. If you’re qualified to buy a home now, the purchase makes sense for your situation and you’re prepared to live in that home for at least five years, there are reasons why you may be headed for a great deal: 1.  Affordability is better than ever.According to the National Association of Realtors’ housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970.  The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income. John and Julie Chilman, for example, recently have been able to stretch their dollars in the Las Vegas area.  The listing price for the five-bedroom home they’re buying was $265,000; they offered $250,000. 

“Our Realtor was like `Yeah, pipe dream. Like they’re going to take that,’” John Chilman said.  “And all they did was counter $255,000 … and they’re paying all closing costs.” The home had lingered on the market, and was listed for $310,000 just six months ago, he said. 2.  You have a large inventory to choose from.In many places it is taking months to sell a home, creating loads of inventory — from new homes to existing homes to foreclosures.  There was a 12.9-month supply of inventory in December given that month’s sales pace, according to NAR.  A large selection gives buyers more choices and drives down prices.  And home sellers have gotten the picture. 3.  Builders are offering big discounts.Homebuilders are getting even more aggressive with their pricing.  In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts.  Plus, you’d have a warranty not only on the home itself, but also on the home’s appliances, he said. 4.   Mortgage rates are historically low.It’s not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments.