How to cope with current real estate market

>> on today's real estate . buying, selling and staying in the new market. no one is predicting a complete recovery but there have been some encouraging signs that will change people's strategies. donna rizato from money magazine has an action plan. good morning to you.

>> good morning.

>> finally, some rays of hope in the housing market which has been a basket case and prices have gone down since 2008 . experts predict this year they will start going up again.

>> we have finally hit a bottom in the market for real estate . 98% of markets are expecting an increase in home prices this year. we expect 2% this year, maybe 3% next year. it's finally going in the right direction.

>> it's probably not going to see maybe ever again some of the 10%, 20% increase in property values we were seeing during the housing boom, right?

>> that's right. that's a good thing. historically home prices increase only a moderate amount. we won't go back to bubble times either.

>> we have tips for buyers, sellers and owners which are people who want to stay in their homes. act quickly before rates go up.

>> rates have been under 4% for months now. those are historic lows. but as the economy continues to improve, mortgage rates are expected to average 4.5% by the middle of the year. still a great rate. but if you want to lock in the lower rate, this is the time to make a move.

>> for buyers who think maybe the rates will keep going down, your advice is --

>> no. rates are expected to stay at this level and then move up. keep your eye on the economy. it's tied to the economy. the economy keeps improving, expectorates to tick up.

>> to take advantage of the best rates you want to have a credit score that's as high as possible which gets us to your second piece of advice.

>> not everybody qualifies for the lowest rate. you need good credit and a good score is 760 or higher. check your score at annualcreditreport.com for your credit report . another $8 you can get your score to see where you stand.

>> you say buyers should focus on smaller homes. why if you can afford a bigger home.

>> it does seem counterintuitive, but when you are buying a home don't always think of price. it's about resale value. if you are staying in the home five years or less you need to think of how hard it will be to sell your home down the road. smaller homes are in demand now, not mcmansions. people are more frugal. they don't want to maintain a large home and baby boomers will be retiring and downsizing. so the demand will be for smaller homes.

>> good-bye, mcmansion. say it isn't so. for sellers, the first one is hard to take. you say price it right.

>> the market will be better but it's been tough more anybody who wants to sell their home. they can feel confident that home prices aren't supposed to drop more. you have to price your home right. 75% of homeowners still think their home is worth more than it is by at least 10%.

>> they believe or hope it's worth more because they want to sell it for a higher price.

>> right.

>> if you're not sure you say to get a second opinion.

>> you're best off looking at comparable home sales from the past 90 days . to get a second opinion is a good idea. not a lot of homes have been sold in your area. hire an appraiser. it will cost you $300 or clz 400. it could be worth it.

>> take advantage of better opportunities to negotiate. what do you mean by that?

>> in recent years to get someone to buy your home you have had to throw in flat screen tvs, cover the closing costs .

>> the family dog . it's terrible.

>> we see more demand particularly from investors. 30% of home purchases are from investors. you probably won't have to throw in all the perks to get your home sold.

>> all right. for owners, folks who want to stay in the home you say to invest in the home. what do you mean?

>> if you want to refinance uh you have to have at least 20% equity in the home. a lot of people don't have it today. you can do a cash-in refinancing. that's where at closing you bring money to the table and then you can put cash in and invest in the home to bring up your equity.

>> so many people in the housing market are under water in mortgages. they owe more than the home is worth. you say look into whether government help is available to you.

>> if you are under water in your home you haven't been able to refinance. but the government revamped the home affordable refinance program. new regulations will take place in the spring. even if you are under water, you may be able to get assistance.

>> and see if you can shave years off your loan.

>> it's great to qualify for a lower loan but 30 years is a long time. if you can reset to 15 or 20 years you pay less interest over time . you may pay more than your regular payment though.

>> great advice.

>> thanks.