Here's my perspective that smaller may be better when buying a home in our "new" economy.
Our new economy shouts everyday that the real estate party sure seems to be over and the clean up has slowly begun.
I can recall seeing charts where home sales and prices where spiking for the early part of the first decade of 2000. The size of the average home was relentlessly growing larger every year as well.
In retrospect what was causing the 'leap frogging" of prices or as some more polished folks termed it "flipping"? Remember that term? It was consumer demand and confidence that buying a house was the way to make some quick money. The result was throwing money at builders and home sellers like there was no tomorrow. The major thought was "it will always be worth more" if I have a little time.
As a real estate agent in New Bern, North Carolina, I remember the office caravan tours we would do every Wednesday morning to see the new inventory. I once visited a home that was re-sold "flipped" within 18 months for about 50K more the second time without any noticable improvements. That home could not be sold by anyone and ended up in the rental inventory market because the new owners moved out of town for another job,
Today I believe that most of the housing I see is still overpriced. This applies to existing and new homes as well. A new starter home runs from about $130k-200k in my region. That's still alot of money for most starter families.
In my opinion here are some solid tips for new home buyers in the new economy:
- Think smaller, the home is less expensive to heat, cool and maintain. You also pay less taxes!
- Try to get some yard with the house instead of all house and no lot, the "zero lot line" concept.
- If you are a two income family see how much home you can qualify on one income only. Things happen and as we have witnessed in the past three years good folks do get fired. Starting over is difficult and usually pays less.
- Look for a home that has a good floor plan that works for you. The most expensive changes you can make are structural and if not done correclty (usually the most expensive way) do not deliver the desired results.
- Buy the neighborhood not the house. If your new dream house backs up to an auto salvage yard (I saw one of these this week) be careful. The things you think you can overlook might be difficult down the road for you or a new owner.
- When considering buying in a new development, check out what the developer can build in later sections or phases of the project. Sometimes they will start with nice homes and then build something different in the later sections that may not be as nice or as appealing. I can name some local examples in New Bern where this has happened and this could impact your value later.
- Single person homeownership has been increasing, especially by women. If you only have one income, perhaps this is the time to enjoy being a renter and having no maintance expenses. Bank some cash and get healthy financially. Besides sometimes as a renter you can enjoying lots of amenties you don't get as a homeowner.
This is not your parent's economy, it's more like your great grand parents reality. They did not buy unless they could pay cash for the extra stuff, if there was any extra stuff. Sure they had a mortgage on the home or maybe a farm but usually not 2 car payments and the monthly credit card bills. Not many vacations to Aruba either.
I did not become a homeowner until age 36. As a single, one income owner for several years, it was not always easy. Sometimes it was very stressful. However being a homeowner has kept me anchored and working hard. I'll be painting some exterior workwork later today!
What I'm suggesting is that you should be careful if and when you decide to buy. Get someone who can help you find and buy the right house if that's what you want. Avoid the high pressure person who needs to sell you a house. Yes, they will pocket a few grand on the deal but you have to pay for it and it is not a short term commitment. With the bigger home you can become "house poor" very quickly.
You can't get out of a mortgage without serious financial ramifications even with the newest term " do a short sale".
What motivated me to write this blog was an article I read this morning calling a 2400-2500 square foot home "small".
Maybe we all can live with less. I have lived in 1200, 1500 and 1800 square foot homes and have been very happy.
It's your money, what do you think?
Opinion by Homer Ray, Certified NC Workforce Housing Specialist
New Bern NC
