Prior to the recession, people simply looked for a house, any house, to buy.  Later on, buyers were hesitant just thinking about buying.  Now, they seem to be on a quest for perfection at the perfect price.  Perfection seeking buyers are turning the battered real estate market upside-down.  Agents are saying that this is leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual.

It is a complete reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners.  Nowadays days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil.

It was largely expected that the housing market would suffer at least a temporary hangover after the government’s $8,000 tax credit expired in April, but not necessarily this much.  In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided.  Builders have been affected too.  The Commerce Department has stated that the construction of new homes in May dropped 17.2 percent from April, which is significantly lower than forecast.  Permits for future construction dropped 10 percent, suggesting a sluggish summer.  Even the lowest home mortgage rates in decades are not doing much to promote deals.  The Mortgage Bankers Association has said that applications for loans to buy houses were down by a third compared with last year.

Against such a backdrop of misery, buyers are empowered — and are taking full advantage of their position.  Buyers, of course, say they are merely being smart.  In some cases, however, agents have said that sellers literally cannot afford to make concessions.  Another $10,000 will push them underwater, which means they will have to arrange the sale through the bank.  Even when a sale can be worked out, it is not uncommon for everyone to walk away feeling more aggravated than excited.

People who think about moving to a new home in retirement invariably plan on buying that home.  In some cases, though, renting may be the smarter option.  Real estate markets are still fairly volatile even though home prices in some areas are beginning to stabilize.  One of the easiest ways to approach the buy versus rent question is to use the “price to rent ratio”.  Just take 2 houses of similar size and quality, one for sale and one for rent, in the same neighborhood or comparable neighborhoods; then take the price of the home for sale and divide it by the total cost of renting the other house for a year.  If the resulting number is higher than 20, it’s likely the price of the home for sale could fall further.  Thus, renting would be the better option.  However, the price is most likely near its low if the figure is 15 or below.  15 is the number at which rental and ownership costs are close to even.

There are other factors to consider when deciding whether to buy or rent.  If you have reason to believe that you are building equity, its okay to pay more to own.  A low price to rent ratio on a property that you plan on being in for more than a decade should signal an attractive buy even if the monthly payment is a bit higher.  But, if you are paying more in context and are unlikely to build equity due to a falling housing market or you won’t be in the home long enough to build equity, you should definitely not buy.

Sitting down with a reputable real estate agent and financial planner can help you decide which options might be best for you.  Whether you are trying to decide whether to live in the city or suburbs or whether to rent or buy, having professionals help you is always the smartest move.