Buying house? Think long term

Now would seem like a rotten time to sell. The economy is in recession and many housing markets around the country have suffered serious downturns.

However, if you're a seller who will also be a buyer in a market where prices have declined, it could be a good time to both sell your current home and buy a new one. You sell for less than you would have in 2004, but you also pay less than you would have then.

To be successful selling in this market, your home needs to be in good condition. Most buyers are bidding on a home they can move into without having to do a lot of work. Also, your home must be priced for the market.

If you've been transferred and need to relocate, there are a couple of options. One is to sell your current home and buy in the new location. Some employers offer relocation assistance that covers many of the selling and moving expenses.

Another option is to rent your current home to a tenant and rent another one in the new location. There are benefits to renting in a new area before buying. It gives you an opportunity to learn about the neighborhoods before committing to a long-term investment.

Transferees who think they could return to their current location within a year or two might be better off renting their current home. However, renting your home can have its drawbacks. Tenants usually won't care for your home the way you would.

Set aside a fund for making improvements after the tenant leaves. Also, retain a gardener to care for the landscaping and make sure you have a property manager or handyman locally who can take care of problems when they arise.

HOUSE HUNTING TIP: Buyers are at an advantage in many marketplaces today. Generally, prices are lower than they were several years ago. And, interest rates are low. At the middle of February 2009, 30-year fixed-rate conforming mortgages were available in the 5 percent range.

Jumbo financing is pricier. However, a 30-year fixed-rate mortgage was available for around 6 percent with some lenders in mid-February. Five-year fixed-rate jumbo mortgages cost less. At some point interest rates will go up, particularly if inflation takes hold following the recession. If you buy using short-term fixed-rate financing, look for a good time to refinance before interest rates go up.

It's not a good time to buy if you think you might be transferred or if your marriage is on the rocks. Buying a new house usually won't solve marital problems unless you're living in a house that's much too small to provide suitable living space.

The unknown factor that keeps many buyers on the sidelines is that prices could drop further before they stabilize or turnaround. So, the house or condo you buy today could be worth less in six months. But, it could be worth more in a few years. However, if you had to sell between now and then, you'd take a loss.

It's impossible to time the market. You'll either buy before or after the market bottoms out. Some people get lucky and buy at the bottom. But, you'll know that only through hindsight. If you buy after the market hits bottom, you'll be faced with more competition from other buyers and probably pay more.

Don't buy unless you know you won't have to move again soon. This includes making sure you buy a home that will accommodate your needs for years to come. Home buying always involves compromises. It's better to buy a home that's too big than one that's too small.

THE CLOSING: Buy for the long term.

Dian Hymer is a nationally syndicated real estate columnist and author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

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