Smart Moves

Whether to Buy Now or Later

For many Americans, this is a puzzling time for the economy. On the one hand, unemployment is low and people are shopping their hearts out. On the other, the stock market is volatile and even economists are unsure where the country is headed.

Such uncertainty is especially worrisome for those moving to take a new job during the first quarter of 2019. Should they buy a property in the new area or wait until the dust settles for the economy and the housing market? That’s a key question.

Merrill Ottwein, a veteran real estate broker specializing in relocation, offers general pointers for buyers unsure of the market.

“Buying a home in a hurry could be a terrific decision if it gets you a dream place and prevents you from locking yourself into an expensive long-term lease. But it could be a lousy choice if you aren’t careful what you buy,” says Ottwein, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

One factor pushing some job-changers into the hasty purchase is the prospect of rising mortgage rates in coming months, according to Paul Lueken, the CEO of a mortgage lending firm based in Chicago.

“Look for the housing sector to have a tougher year in 2019, unless 30-year fixed mortgage rates can fall back to the low fours,” Lueken says.

But in most neighborhoods, home valuations should remain relatively stable in the near future, regardless of a possible slump in the overall economy, says Mark Boud, the chief economist for Metrostudy, a firm that provides market intelligence to the homebuilding industry.

Boud says that even if there is a recession in coming months, home values won’t drop the way they did during the downturn a decade ago. That’s because many areas remain short on housing inventory, particularly in the starter-home segment.

Here are a few pointers for income-limited homebuyers in a hurry:

-- Challenge the idea of accepting a long commute.

It’s no secret that housing is still a major expense for those on tight budgets, especially first-time buyers with moderate incomes. Because of that, some buyers make tough trade-offs they later come to regret. Ottwein says it’s not unusual for some purchasers to accept a punishing commute to a distant community in order to buy a large house.

How long a commute is too long? That depends on the buyers involved and the type of commute. For example, driving in heavy stop-and-start traffic can become far more tiring than one on a free-flowing highway.

“I would worry about any commute that’s over 50 minutes each way. But in some cases, this could be tolerable to get what you want. For example, if you work in the city but love horses, you might be willing to make a long daily commute to get the rural acreage you need for that lifestyle,” Ottwein says.

-- Exercise caution before buying a “fixer-upper.”

Ottwein urges any homebuyer considering a property that needs rehab work to get reliable estimates on the cost of restoring the place. To obtain a sense of potential repair costs, your home inspector can help with estimates, and your real estate agent should be willing to help you arrange with contractors for bids.

Are you convinced you could handle the renovation work yourself?

If so, Ottwein recommends you do a reality check by canvassing friends who know you well. Ask them if they think this big do-it-yourself project would be a good option for you, both in terms of your skill level and available free time.

“Your friends can help you gain perspective on the possible pitfalls,” he says.

-- Choose options early when buying in a new subdivision.

If you’re planning to purchase a brand-new house, you’re likely to be faced with many trade-offs before your contract is written.

“For one package price, some builders give lump-sum allowances for anything ranging from lighting fixtures to appliances to landscaping to kitchen cabinets. Anything not included in that package will cost you extra money,” Ottwein says.

These choices should be made before the sales contract is written, but not under pressure from a hurried homebuilder or salesperson.

Those who are indecisive at the outset may find they have to pay a premium price for options they later decide they want.

“Once your contract is signed, you have little leverage left in negotiating with the builder," Ottwein says.

New-home buyers on a tight budget may wish to defer those items that can be installed later with relative ease, such as landscaping upgrades or window treatments.

“Lock in early those choices that are part of the infrastructure. The other options can wait until you have the funds to put them in yourself,” Ottwein says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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