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.
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.