Real Estate Advisor: August
The Modern Commuting Homeowner
Norman Rockwell-esque visions of a workforce living and working in the same community have been replaced by shadow of the modern commuter. Rising early in the morning and often returning well after sunset, they are traveling further to and from work each year. But just who are these road warriors, and what drives them to such great lengths?
White Picket Fences: The Classic Commuter
As home prices in urban areas have risen over time, the working American has often looked to the suburbs to fulfill the dream of homeownership. The traditional image of the commuting worker is the man or woman who pulls out of their quiet cul-de-sac in the morning and heads into the hustle and bustle of the city.
The appeal of suburban and outlying areas for homebuyers is obvious. Home prices
outside of metropolitan areas are generally cheaper than inside the urban core,
and buyers can afford larger homes with more amenities. In some markets, the
suburbs offer the only affordable refuge for buyers interested in single-family
properties.
In addition, many suburban areas boast stronger school systems and a welcoming community atmosphere. Many suburban homeowners, particularly those with children, cite the feeling of safety and security as one of the primary attractions to living outside of the city.
City Nights: The Reverse Commuter
Over the last 20 years, an increasing number of corporations and industries have moved their business operations outside the urban core of American cityscapes. As this trend has developed, more and more twenty and thirty-somethings have been placed an importance on the lifestyle typically found major metropolitan areas. From these two parallel developments the reverse commuter was born.
Demographically, reverse commuters skew younger than traditional commutes. They are attracted to life in urban areas for many reasons, among them a more diverse array of arts, dining and cultural opportunities, vibrant nightlife and the chance to live near residents of a similar age group. Most reverse commuters prefer the perks of city life to the benefits of suburban living situations.
Reverse commutes are more likely to own condominiums or townhouses than their suburban counterparts. In some cases, the prohibitive cost of home ownership even in suburban outskirts sends buyers back into the city to purchase condos. In addition, many who have not made the transition to home ownership rent apartments or homes in they city while commuting to outlying areas for work.
The Cost of the Commute
Life as a commuter comes with some very real costs. The biggest single expense is gasoline itself, particularly with gasoline prices hovering in near $3 per gallon nationwide. Another chief expenditure is on vehicle maintenance, as the increased mileage on the road translates to more wear and tear on even the most robust of cars. In 2004, the Bureau of Transportation Statistics estimated the total average cost per mile of driving a vehicle at 56.2 cents (including gas and maintenance.)
Other expenses are less obvious. Commuting parents spend more on child care and supervision than their "stay local" counterparts, particularly in two-income families. Added time in the car also generally means more meals purchased en route to and from the office.
What Kind of Life?
Ask a commuter why he or she puts up with the traffic, costs and time away from home, and he or she will likely mention a desire to preserve their current lifestyle. Whether soothed by the calm and stability of suburbia or enthralled by the fast-pace and unpredictability of the city, commuters spend much of their waking hours behind the wheel in order to maintain a certain lifestyle.
Many question whether the benefits of commuting (whether traditional or reverse commuting) are worth the sacrifices. Aside from the monetary requirements, commuting reduces the time spent with family and friends and frequently increases stress levels. Additional time spent driving (or riding public transportation) often comes at the expense of time that might otherwise be devoted to exercise, rest or sleep. These denials, when combined with an increased intake of fast food or junk food as a result of commuting, can have profoundly negative impacts on an individual's health.
Despite these and other drawbacks, hundreds of thousands will continue to make the daily trek to work and back home again. Whether out of financial necessity or the desire to preserve a way of life, the commuter will live on.
Buying Tactics in Changing Markets
Over the last three decades, the real estate industry has seen unprecedented growth and profitability. Rates of home appreciation have been on a steady incline, resulting in many highly competitive housing markets. In many areas throughout the country, prospective homebuyers have been obliged to spend more, settle for less, or risk losing out on the housing hunt altogether.
Gradually, the market is beginning to show signs of changing. While certain areas remain highly active, national benchmarks such as rate of appreciation, average days on market and housing inventory indicate that real estate overall is edging towards a more balanced landscape. Homebuyers savvy enough to match their approach to the realities of today's market are more likely to find success.
Gauge Your Market Carefully
Identifying whether your market is "hot" or "cooling" is crucial when planning
your home buying strategy. To do so, you must first properly define what your
buying market is. In real estate, market is defined not only by geographical
area but also by things like target price range and property type. For example,
sales of high end single family homes in your most coveted neighborhood might be
at a standstill while condo sales may be at an all time high.
With your market established, begin researching recent conditions. Are properties selling fast, or are they lingering on the market for months at a time? Are listings selling above, at, or below asking price? How often are buyers receiving multiple bids? How common are price reductions? How do local trends in the lat month or two compare to trends in the six months previous? Often the best way to get a read on such factors is with a professionally prepared Comparative Market Analysis.
Things to Avoid
If your market is in fact showing signs of softening, don't count on future appreciation when making an offer on a home. In hot markets many buyers overpay based on the theory that rapid appreciation will soon cover the additional investment, but this is an inadvisable tactic if appreciation rates are slowing. By the same token, future increase in a home's value should not be counted on to cover the cost of necessary repairs.
One common buyer's tactic in hot markets is to waive the home inspection as means of sweetening the deal for the seller. This kind of buyer risk is unnecessary in balanced markets. Another popular strategy, the use of "no cost" mortgages (mortgages that defer up-front costs at the expense of higher interest rates), is also inadvisable. With interest rates edging slightly higher than in the past, there is generally more advantage in paying the "points" now rather than adding on to the mortgage interest rate, particularly if you're buying for the long term.
Home Search Tactics
Watch Older Listings - Homes that have lingered on the market for months can indicate sellers who are beginning to feel nervous. As a result, you may be able to find a home for less or afford a larger home than you thought possible if you keep an eye on "old" properties. Consider making an offer below listing offer on a home that has been on the market for sometime. A beleaguered seller may be more than willing to negotiate.
Look for Price Reductions - Buyers tend to instinctively
focus on listings new to the marketplace, ignoring changes in previous listings.
This is a mistake in high inventory, slowing markets as price reductions tend to
be much more common. Pay attention to desirable homes that may be "just" outside
of your price range - they may drop in price and fall right into your lap.
Negotiating
The true shift in power in a more balanced marketplace will be felt in the negotiation process. While previous years have been marked by the multiple offer bidding war, more reasonable markets are characterized by rounds of offers and counteroffers. Two things to consider:
Remain Patient with Sellers - Many sellers may resist the notion that the market is any less favorable to their position. If an offer you've made on a property is rejected, do not assume that you must make a higher offer to avoid losing the property. If given time, the seller may realize that the offer you've made is very reasonable given the current status of the market.
React to Counteroffers - Counteroffers, even if substantially higher than your original offer, indicate a seller's willingness to negotiate. In slower markets buyers should feel more free to respond to counter offers with figures just above or even identical to the original offer made.
