Do You Know if it is Still a Buyer's Market in Real Estate?

There are many people wanting to know if it is still a buyer's market in real estate, but they must be careful because the term buyer's market could lead them to making a mistake. Yes, there are still many houses available on the market and there are less people looking to buy a home.

While prices have shown signs of stabilizing, they may not have yet bottomed out, which means there will be deals available to those who look for them. In addition, there is a backlog of foreclosures which are bound to come on the market and add to a market already full of unsold houses. To add to the mix, baby boomers have begun to retire, and they are looking to sell their houses, which will only add to the supply.

However, all of this information is meaningless to a buyer who gets into a bad loan and then ends up defaulting, which how the real estate market got into a mess in the first place. To put it in simple terms, a house that was worth $600,000 before the crisis and is now selling for $450,000 may be seen as quite a deal since the value has decreased by $450,000.

However, something that buyers should know is that lenders consider a loan that is three times a borrower's annual income to be a very safe loan. If the income between you and your spouse comes to $100,000 annually, a safe loan for you would be $300,000, and that's with a 20% down payment which comes to $60,000.

If you were to try to get a $450,000 mortgage loan, you could be stretching your budget to the breaking point and you would be in real danger of losing the home at some point down the line. Even the real estate market remains a buyer's market, meaning that there are more houses available than there are buyers and that house prices have continued to decrease, you still have to consider whether you would be getting a safe loan.

There are people who are still getting loans at six times their annual income, which is truly a formula for disaster if incomes do not go up so that they can keep up with their mortgage payments. Another way to look at the market is to see whether it is cheaper to rent than to buy the same quality and size house in the same school district.

Annual rents, on average, are around 3% of purchase price on both coasts of the United States. On the other hand, mortgage rates are still around 6%, which means that would be paying twice as much to borrow money to buy the house than you would be paying to borrow the house, which is what renting actually is.

If you want to take advantage of the buyer's market, then you first have to consider what a safe loan for you is. Remember that lenders consider a safe loan to be 3 times your annual income, plus a 20% down payment. If you find a house that is undervalued, and if the house falls within what would be a safe loan for you, then you would really be able to take advantage of the buyer's market.

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