Why Pricing is the Single Most Significant Consideration When Purchasing a House

Why Pricing is the Single Most Significant Consideration When Purchasing a House

The property market is not what it once was. Unless you've been living under a rock, I'm sure you know that! For many years, housing prices went up and up and up. There were a couple of years of adjustment, now and then, but in general you could count on making money with home ownership. According to who you talk to, it could be that that's all changed! Some people think that the economy will heal in a couple of years. (They're dreaming!) Others think this could be the new normal. The truth is probably somewhere down the middle of those two extremes. Where exactly is anyone's guess.

This greatly impacts your property buying decision, because you are now no longer assured of making money through appreciation. Heck, you're not necessarily assured of appreciation at all! Basically, in order to generate profits on your house, or even if you are only hoping to break even, you will need to buy at market value or less. And, that's a new concept for most realty buyers.

If this were another type of investment you were buying, it would all be a lot easier, simply because you wouldn't be emotionally involved. But houses in the usa are historically different! They're both investments together with a place to live, a location to come home to, and a house to raise a family in. It's tough to make good financial decisions when you're emotionally attached to something.

We're in a down market. A down market is different from an up market. In a down market, you should buy below value in order to earn money or even to break even, as I've said. The psychology of a market like the one we're in is something that folks aren't used to, though. For instance, many buyers get their cues as to the value of a house from the asking prices of other houses they've seen. If, for instance, everyone is asking $700,000 for a given type of house in a given area, most buyers might assume that that's the real value of a house they're looking at. In an up market, that was probably the case. Or even if it weren't, you wouldn't get hurt far too much believing that price because in a few years appreciation would save you. But now, it could easily be that everyone who's residence is on the market is asking excessively.

You see, most of the people who have houses on the market bought only a few years ago during the up market. Quite simply, they paid an excessive amount of! They also leveraged themselves far too much. Basically, their mortgages are too big. They price their houses to be able to at least pay off their mortgages. But even the mortgage amount is more than the home is currently worth. So, if you buy at the seller's price, you're already paying far too much.

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