Washington Week: Student Voices (O)

COLUMN: Future homeowners: Buy now, save $$$ later
By Danielle Dupree And Cynthia Parker
District Chronicles (Howard U.)
06/30/2006

(U-WIRE) WASHINGTON — Even though homes in the DC housing market may be on the market a few days longer, that doesn't mean prices are dropping significantly. According to the May 2006 Metropolitan Regional Information Systems, Inc. (MRIS) report, in the last quarter of 2005, the average sales price in The District, Prince George's County, Alexandria and Arlington County was $558,000, $327,500, $503,500, $579,300, respectively. Hence, and not surprisingly, most renters worry if they will ever be able to afford to purchase real estate in a still thriving market.

One solution is to postpone plans to find your "dream" home, and concentrate on finding your "starter" home. Too many of us, have visions of moving from a bedroom or basement apartment in our parents' house, to a multi-level mansion. Let's be realistic. It's true, buying studio or one-bedroom condo units in the city was once taboo, due to low resale value. Today, just to get a piece of the real estate pie, many first timers are opting for smaller units in more expensive urban areas. Young professionals who want to be in the heart of the city, near arts, entertainment, dining, public transportation, and at least one Starbucks, are quick to purchase such units. There is a huge market for these "urban" units because they are appreciating just as fast as some 2-bedroom units. These savvy buyers know, going in, that this is not the home in which they will raise a family or retire. It's more of a solution to build equity for the next home purchase. Or, it can be utilized as an income-producing property. What a great way to diversify your portfolio!

If you still want to purchase a bigger home, purchasing with a roommate is another option. Whether it's a college buddy, a relative, a significant other, or a parent, you can split the costs. You should also consult a title attorney on how to hold title in each situation. Sharing the costs to own, allows the opportunity to build much needed equity.

Another popular option is residing in suburban areas miles away from The District. Most of us do commute to The District quite frequently. So, of course, you have to consider your commute, which can be quite discouraging when you think about Beltway traffic and the rising cost of fuel. Some employers may reimburse commuting expenses or allow you to telecommute. Nevertheless, this can be a great solution to buying more house for your money. In 2006, we're starting to see more sellers offer closing help. Observers have noticed many new construction condo developers offering plasma screen televisions, stainless upgrades, no condo fees (for a specified period), gym memberships and deeded parking spaces. Pretty soon, more sellers may entice borrowers with seller financing. That's always ideal for buyers!

Believe it or not, today's rates are still low. As of this writing, the prime rate is at 8%. Even though you may be reluctant to buy in this hot "seller's market", low rates coupled with the area's respectable average appreciation, means it's still a good time to purchase. Let's put this in perspective. The Wall Street Journal reported that in October 1980, the prime rate was over 20%!!! In essence, homeowners paid more to borrow less. So don't just sit on the sidelines waiting for 5% rates to return.

If it's worthwhile, you can always refinance for the lower rate later. Consult a Realtor who can help familiarize you with the different housing options and what homes are selling for in neighborhoods that interest you.

They can also advise you on how to get your best offer to purchase accepted. Talk to a mortgage consultant to see what you qualify for, what you can afford today and discover loan programs that best fit your situation. Don't let rising interest rates defer your chance to start building your own equity, not your landlord's.

[ Back to Student Voices ]