Housing Market Slump is Good for Buyers

The New York Times recently ran an article announcing yet another drop in housing sales: Houses were selling more slowly, and were raking in less dough when they did finally sell.  To quote exact numbers, August home sales fell to an annual rate of 795,000, and the average price dropped to $225,700.

Things may not be as bleak as the report suggests, however.  Only a few days later, Washington Post writer Michelle Singletary declared that the housing market slump could actually be good for homebuyers:

“Mortgage interest rates have been declining and loan availability is improving,” said NAR President Pat V. Combs. “The abundant choice of homes is permitting buyers to better negotiate price and terms.”

Basically, as houses stay on the market longer and sellers become desperate, buyers gain the upper hand.  A buyer can get a really good deal right now if they know what they’re doing.

Of course, as Singletary points out, the “knowing what they’re doing” is the tricky part.  Many buyers have little or no understanding of what it takes financially to buy a home.  To prove her point, Singletary quotes a Bankrate.com survey, which demonstrated that more than a third of homeowners didn’t know what type of mortgage they had.

If you are considering taking advantage of the housing slump, Singletary recommends a book that will ensure you get as good a deal on your loan as you do on the house: David Reed’s Mortgage Confidential: What You Need to Know That Your Lender Won’t Tell You.  Foreclosure rates are high right now precisely because not too long ago, lots of buyers took advantage of a similar buyers’ market without understanding what kind of loan trouble they were getting themselves into.  Reed’s book is an attempt to try to help people understand their loans, and thereby prevent the same thing from happening again.

In other words, a housing market slump is not necessarily a bad thing, particularly if you are a buyer looking for a good deal.  On the other hand, one of the causes of the current housing slump – the high foreclosure rate – is a not-so-subtle reminder that it’s a good idea to know what you’re doing before making the leap!

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