- The Washington Times - Wednesday, June 21, 2006

It’s not a buyer’s market officially in a lot of areas, but it’s now starting to favor buyers after years of transactions where buyers had to escalate prices by the tens of thousands and nix home inspections, appraisals and the like. Thus, my advice to buyers is to get out there and catch a deal while you can.

All the indicators keep pointing to a healthy, vibrant real estate market in most cities around the country. Slowing down doesn’t mean dead, it just means, well, slowing down.

In the last five years, several markets have created an astounding amount of job growth, which is the first indicator and supporter of a robust real estate market. Washington and its suburbs lead the way in the six markets that created more than 100,000 jobs in five years:

• Washington — 369,000

• Miami — 253,000

• Phoenix — 221,000

• New York — 157,000

• Los Angeles — 155,000

• Houston — 118,000

Economic forecasters predict that in the next four years, the Washington area will create 40 percent more jobs than were created in the last four years.

With that kind of growth, why the slowdown in the market? It’s for a multiple reasons:

m Rentals are cheaper than owning. In the other markets listed, appreciation upward of 50 percent has priced or shocked some buyers out of the market. They turned to renting instead, hoping to wait for the market to slow down or slip back.

“The rental market is very good right now,” says Leonard Wood, an apartment and condo builder from Atlanta and chairman of the National Association of Home Builder’s Multifamily Leadership Board. In an e-newsletter from NAHB, Mr. Wood says, “Over the past three years, there have been thousands of rental units converted and sold as condos and, at the same time, few new rental apartments were being built. This leaves us with a supply-constrained market while demand is growing.”

m Mortgage interest rates rise. Part of the economic cool-down is orchestrated by the Federal Reserve’s moves to increase interest rates. A growing economy can turn into an inflationary economy — which damages buying power for homeowners and consumers of all products alike. So interest rates are raised to slow down the economy. As interest rates move up, buyers are edged out of the market.

• Waffling consumer confidence. A recent Associated Press report pointed out that consumers are up and down on the economy. “Consumer confidence, which reached a four-year high in April, lost ground in May,” says Lynn Franco, director of the New York-based Conference Board Consumer Research Center, as quoted by Associated Press. “Apprehension about the short-term outlook for the economy, the labor market and consumers’ earning potential has driven the Expectations Index down to levels not seen since the aftermath of the hurricanes last summer.”

The challenge for home sellers and buyers is that economic forecasts many times are driven by the “feelings” of people and investors, rather than reality.

Here are the facts: Jobs “grew” last month. The Expectations Index was the second highest ever. Interest rates are still at historic lows. We are nearly at full employment. Often, fear drives a market rather than reality. As a home buyer looking for a house to live in or as an investment, look at the facts.

When a market levels or cools, this is when the smart consumer can really get his or her money’s worth.

How would you like to buy a house at a 5 or 10 percent discount? It’s happening now in markets around the country. Sellers are still mopping up from years of equity growth, but they have to move now and are willing to negotiate downward on their asking prices.

Sorry, sellers, you’re not going to like this: Buyers, name your price.

If the asking price is $500,000, start at $20,000 or $30,000 below. Start somewhere and get the ball rolling. Then start your list of add-ons: home inspection, home warranty, closing costs — some loan programs allow up to 6 percent.

Don’t be bashful.

My word to the sellers: Don’t be offended. If your house has been sitting on the market for 60, 90 or 120 days, consider any offer a good offer.

Let the negotiations begin.

M. Anthony Carr has covered real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions or comments at his Web log (https://commonsenserealestate.blogspot.com).

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