Friday, January 2, 2009

Where to find home equity growth

A continued pattern of reversed migration to the South could bode well both for homebuyers seeking home equity gains and for abandoned housing markets struggling with unsold inventories.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - A continued pattern of reversed migration to the South could bode well both for homebuyers seeking home equity gains and for abandoned housing markets struggling with unsold inventories.

"American Mobility Who Moves? Who Stays Put? Where’s Home?" a new Pew Research Center Social & Demographic Trends survey found that most Americans have moved to a new community at least once in their lives, but a record low number changed residences in recent, more economically troubling years.

Only 13 percent of the U.S. population changed residences between 2006 and 2007, the lowest share since the Census Bureau began to publish statistics on this topic in the late 1940s, according to the report.

However, in 2007, when American's did move, their net migration patterns tracked heavy in the South, but much lighter in the far West and Northeast, according to Pew.

During the same period, the South revealed greater home price strength than the West and Northeast, according to the Federal Housing Finance Agency's (FHFA, formerly the Office of Federal Housing Enterprise Oversight, OFHEO) Home Price Index (HPI) for the last quarter of 2007.

Not surprisingly, "About half of all moves are for housing-related reasons, such as buying a new house or moving to a better neighborhood," according to the Pew report.

The current migration trend is a reversal of the rush-to-boom-towns frenzy during the first half of the decade. The reversal leaves behind growing inventories of cheaper homes in boom-gone-bust regions. Lower prices eventually will help induce recovery, but for now, Americans are heading for greener pastures, seeking already more affordable housing in markets with greater housing strength.

The most recent HPI for the third quarter of 2008 reveals the South maintaining its price-strength lead.

Alabama, Kentucky, North and South Carolina, Oklahoma, Texas and Tennessee, all enjoyed home price increases of 1.4 percent or better, year-over-year in the third quarter this year, according to the HPI.

North Dakota (at 4 percent, the highest in the nation) and South Dakota (3.9 percent), Montana, Wyoming and Maine were among the few states outside the South that saw the price increases during the same period.

Other southern states Arkansas, Kansas, Louisiana, Mississippi and West Virginia, along with Iowa, saw smaller price gains, but gains nonetheless, the HPI reveals.

The remaining states' home price growth was in the red or flat.

Of course, simply moving South doesn't guarantee home price gains or bargain deals. The fundamentals of home shopping still apply -- perhaps now more than ever.

Here's how to cash in on the trend of reversed migration.

• Wise up. Obtain general knowledge about the home-buying process and the real estate market. A glut of information is available on the Internet. Free real estate industry-sponsored seminars and workshops in your neighborhood can help get you schooled. And a vast library of real estate guide books can serve as your text books.

Buyers who don't educate themselves about prices and markets tend to low-ball sellers and ask for too many concessions. Even in a buyers' market, that can alienate sellers, especially those less motivated with top-value homes. The seller will simply look elsewhere for a more reasonable buyer.

Likewise, don't pay a seller's market price in a buyer's market. The mistake could leave you with a home that immediately loses value. Home buyers should make the same price checks a seller makes to price it right -- get comparables, track sale prices in your shopping area, use the local newspaper, online listings and for sale sites and other sources, to keep tabs on asking prices. Visit open houses. Use a real estate agent schooled in the history of market trends and statistics.

• Know your neighborhood. Real estate markets are local. It can be designated by a small community, larger region or greater geographic area. Even a buyers' market is typically spotty occurring in some neighborhoods and not others or first in one area and then spreading to others. Learn the boundaries of buyers' markets. The larger the area, the greater your bargaining power. Look for high inventories, but some appreciation growth.

• Buy smart. Buy the least expensive house on the best block. Buy into the least expensive neighborhood in the best community. Buy into the least expensive city in the best region. The cheapest home in a neighborhood, community or region in transition will give you the greatest return on your investment.

• Show sellers the money. Don't let a false sense of power overcome you. Even motivated sellers aren't going to wait around for your money to show up. Get your credit report checked and in order. Get your loan approved and guaranteed. Lock in your mortgage rate.

• Buy for keeps. In today's market, if you are looking for heavy equity gains, plan on sticking around. Buy a home because you need it, not because it's a bargain.

If you liked this story see:
How to buy a home like a high roller
Get out of town, buy a home
Reverse migration favoring buyers
Where'd everybody go?
Americans migrating for cheaper housing
DeadlineNews.Com's "Boom and Bust" section

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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