Homebuying Tips for Spring Shoppers

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NEW YORK (MainStreet) — It’s a classic homebuyer’s dilemma: Should you follow the fads, try to serve your long-term needs or settle on the best bargain you can find? Homebuyers always have to wrestle with these conflicting issues, but the dilemma seems especially difficult this spring.

On one hand, there appears to be a vast supply of housing bargains out there — homes selling for tens of thousands less than they were a few years ago — but on the other hand, how can you be sure that a home’s value has finished falling?

To minimize the consequences of getting the timing wrong, you should simply buy a home that will serve your needs for a long, long time. If you plan to start a family, for instance, you can buy a three-bedroom home even if you need only one or two bedrooms today, saving all the expenses of trading up. But that means shouldering bigger mortgage payments, bigger tax bills and higher insurance and maintenance costs.

Then there’s the matter of trends and style.

A few years ago, “McMansions” were all the rage, as buyers wanted dramatic, two-story entryways, family rooms, plus traditional living rooms, formal dining rooms, plus big eat-in kitchens and spacious water-gulping yards that required professional care.

Now the trends are changing: Buyers prefer homes that are smaller and cheaper. And instead of pushing out into distant suburbs to get the latest home designs, more buyers are opting for close-in communities that offer shorter and cheaper commutes. The result is a plunge in new-home sales, which are most frequently found in the outer ring of suburbs.

So how can we tell if this trend will last? If the economy gets back on track, home values will firm up and people will worry less about losing their jobs. And don’t buyers equate bigger with better? Since there’s no way to know for sure, this spring’s homebuyers would be wise to reflect on the factors that always play a big role in home values, in the good times and the bad.

School quality. Unless you find a neighborhood that clearly caters only to young singles or retirees, the quality of the public schools is sure to be a key factor in home values. Communities known for excellent schools tend to want to keep it that way and this helps to maintain housing values.

Safety. Like school quality, crime levels can also have a dramatic effect on home values. People like to know that it’s safe to walk at night or to send a child to a friend’s on a bicycle.

Easy commutes. All things being equal, people obviously prefer spending less time and money traveling to work and back. A community that provides good, uncongested access via roads or public transportation will always be desirable. Buyers may settle for difficult commutes when other factors like the desirability of owning a new McMansion matter to them, but when gas tops $4 a gallon, the suburb 50 miles from the city may seem far less desirable.

A stable economy. A community that depends on a single employer or industry is more prone to boom-bust cycles than one with many.

Conspicuous consumption versus practicality. Nice kitchens and bathrooms are sure to remain popular, but lots of expensive home features can make a home a white elephant if money gets tight.

A one- or two-car garage is likely to remain in demand, while a three-car garage may look like an unnecessary extravagance.

And while it’s nice to have a fully-furnished, dedicated guest room, many homeowners do just fine letting the den, kid’s room or finished basement do double-duty.

A pool is great for a couple of months a year, but can also be a money pit and eyesore during the off season. As a starting point, think of any room that would not be used every day as a luxury that might not be worth paying for.

Homes are not good investments. Generally, home prices rise at just over the inflation rate, which is much less than investors historically have earned with a diversified portfolio of stocks and bonds. On a purely financial basis, it probably will pay to buy a less expensive home and invest the remaining cash another way.

Buying a home is always a gamble, but the risks can generally be reduced by keeping the purchase modest, planning to stay for the long term and being attentive to factors like schools, commutes and economic stability that tend to support home values over the long term.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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