Michael on April 28th, 2010
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Though my wife and I continue to look for a home, it’s been a while since I blogged about our  housing search. Last year, I shared with you our experiences, including:

But since last summer, I’ve written virtually nothing about our home search.  Shortly after not getting the home we bid on last summer*, we got sidetracked.  Life got even busier, we had some big personal stuff to deal with, ya da ya da ya da, so the home search went on the back-burner.

A few weeks ago, we picked up our search in greater earnest.

Some people in the industry assumed that our more deliberate attempt was timed around the impending expiration of the first time home buyer tax credit.

You: Was it?

Now, there are certain elements of my life where I thrive on last minute pressure.  (The best example is my approach to airline travel, where I consider it a failure if I have time to sit in the airport.)  But buying a home?  No last minute pressure needed.

Instead, we have the self-imposed deadline of moving into a home before the next school year begins, as our oldest daughter is about to begin kindergarten and we’d just as soon not have to move her shortly after she begins her formal schooling.

You: Can you really call kindergarten formal schooling?

I wasn’t sure what else to call it.

You: Can’t you just call it kindergarten?

Yes, but then the sentence would have had two kindergarten’s in it.

You: So?

You’re right. She’ll start kindergarten next year.  Jeez.

Anyway, the first time home buyer tax credit would be worth $8,000 to my wife and I, so it’s not to be discarded. In fact, we’re still hoping to take advantage.

You: You’d have to move fast.

Yes, we’d have to come under agreement by Friday and close within two months.  If it happens, great, but if not, the world continues.

You: How could you be so cavalier about $8,000?  You’re a financial educator!

It’s not that I wouldn’t like $8,000. Heck, I’d love $8,000. It’s just that you have to think about it in the context of other things.

You: Well, to me, the context is either you get eight grand or you don’t get eight grand.  If it were me, I’d choose the option where I get the eight grand. What larger context are you thinking about?

What the market might look like after April 30.

You: What do you mean?

Anecdotally, the looming expiration of the home buyer credit is pushing sales forward into April. People who might not buy (or sell for that matter) for another month or two are rushing to get their deals done this month.  For them, the credit is a much bigger opportunity.

You: Why is it a bigger consideration to them than it is to you?

For better or worse, low down-payment and FHA loans are still very common.  This means that a buyer purchasing a $200,000 home might only have to write a check for about $6,000. Maybe $10,000.  If the buyer qualifies for the credit, the net amount of their own money they have to put into the home is negligible.  It’s like getting a home with no money down.

You:That doesn’t sound good.

I agree. In fact, that was part of the problem causing the housing correction in the first place, though there were definitely other factors involved.

On the other hand, my wife and I, along with numerous others trying to be fiscally responsible when buying a home, will put down 20% or more of the home purchase price. Such a move means the avoidance of primary mortgage insurance (PMI) a significant cost that provides you no upside (any insurance benefit goes to the bank; but the premium cost is paid by you).  As such, we’ll be handing over a rather large check when we close. Yes, it would be nice to have $8,000 come back to us several weeks later in the form of a credit, but if we don’t get it, life will go on.

We’re hoping to find the right home in the next two days, but if we don’t, I’m confident we’ll be one of the few couples shopping in May and June. That will give us leverage in any future negotiation process. It wouldn’t surprise me at all if that future supply/demand imbalance gets us an additional concession greater than the $8,000 we lost by not coming to an agreement this week.  In our case, if the home price goes down by $10,000, we’re writing a check for $10,000 less.  Since $10,000 is greater than $8,000, we win.

The only thing we’re trying to avoid is purchasing a home next week that we could have purchased (at about the same price) this week.

I’ll keep you posted (more frequently than the last few months, too).

Who has thoughts on this?

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*By the way, remember the home we didn’t get last year because we were outbid? Just learned yesterday that neither did anyone else. Turns out the sellers backed out at the last minute and decided to stay put.  Now I’m kind of glad we weren’t the ones who had their dreams crushed at the last minute.  (Better not to get your hopes up so high in the first place, but I imagine it would be hard to avoid seeing yourself in the home after you have a contract in place. Nonetheless, my lesson is to do my best not to get too overjoyed until someone hands me keys.)

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