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Home Sellers Receive Good Fortune Form Builders Misfortune

(The national real estate market has been providing dismal results and even worse news for prospective home sellers every time they pick up the newspaper or turn on a television newscast. )

While the real estate market in the United States has been bad for both buyers and sellers for the first half of 2006, each month thereafter has been allowing buyers to gain control for the first time since the great boom began in 2000.

But as the article, “Existing Home Sellers May Relish Plunging New Homes Report” written by Blanche Evans and posted November 20, 2006 on Realty Times indicates, sellers have new hope for their sale in the wake of dying home builders.

“Housing starts, that metric put out by the National Association of Home Builders (NAB) that means that homes are beginning construction, plunged in October to a six-year low. With starts dropping 14.6 percent, that's the lowest level since July 2000. Building permits were down 6.3 percent -- the lowest rate in nine years.”

Home builders have an advantage over existing home sellers because they can offer buyer incentives such as free landscaping, in-ground pool and other upgrades.

Now, unlike home builders, existing home sellers can enter the market with just a phone call to an agent, but often do not have the amenities and financial ability to offer incentives similar to home builders.

So as housing starts decrease, buyers will be looking to take advantage of existing homes with reduced prices. After all, most people do not want to wait around for a new home to be built once they decide on owning property.

“Both the National Association of Realtors and the National Association of Home Builders suggest that now is a great time to buy. As the NAHB explains it, ‘Thanks to the concept of ‘leveraging,’ purchasing a home is by far the best long-term investment.’” 

Leveraging basically means putting down a small amount of money in the hopes of earning a much larger return.

‘‘For example, say you use that $10,000 to purchase a $150,000 home and the house appreciates five percent during the first year. That means after one year, the house would be worth $157,500 -- a gain of $7,500. Your annual return on your $10,000 investment would be a whopping 75 percent.”

This is contrasted by the popular belief of using additional finances to invest in mutual funds or the stock market. A decent return on a stock is a 5.0 percent gain. So, if you invested that same $10,000 into the stock market, you would only net a $500 return opposed to a $7,500.

The low interest rates and abundance of lower priced pre-existing homes for sale are making the buyer’s market profitable for sellers as well as buyer’s are thinking they need to act as soon as possible.

“However, the open window may shut soon if buyers pile back into the market, scarfing up standing new home inventory as well as existing homes for sale. That could quickly reignite starts which will in turn reignite interest rates.”

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