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The latest data shows home sales plunged in July to the lowest levels in more than a decade, a report far worse than most experts had forecast. If you’re in the market as a buyer or seller, what does this mean for you?

For most, it suggests that patience will be the best policy.

The National Association of Realtors said Aug. 24 that homes sold at an annualized rate of just 3.83 million units in July, 25.5% below the level of July 2009, and more than 27% below the level a month earlier in June. The median home price went up just 0.7 % over the past year. Also remember that the market had a huge overhang of homes for sale, which was more than a year’s supply. And that’s what might have caused these prices to drop.

Is there any silver lining to be seen in all this? Certainly low prices are good for buyers, especially first-timers who don’t have to sell a home before they can buy one.

In the long run, people may be better off if homes are seen as homes rather than investments as well. The home-as-investment fever of the past years often drove people to spend more than they needed to or should, soaking up money that might have fared better in other investments.

Today’s home seller obviously has to be patient and “realistic,” a term real estate agents often use to help them accept a lower price.

While figures show that home prices have leveled off, the numbers represent only the homes that have actually sold. It doesn’t do the seller any good to hold out for a dream price if the home won’t attract a buyer. And many homes have just been sitting on the market for months and months.

In a buyer’s market, sellers are smart to do all they can to sweeten the deal. Throwing in appliances, home warranties and anything else they can think of might save the buyer some headaches and expenses.

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Of course, it only pays if these things can be done inexpensively, as many improvements do not pay for themselves when the property is sold. Painting and landscaping are generally the most cost-effective improvements, especially if you do the work yourself. And sellers are also wise to remove clutter, odors, stains — basically anything that hurts a buyer’s first impression.

Slow sales mean there are lots of hungry real estate agents, which sounds like a good time to try to negotiate a commission below the typical 6%. On the other hand, an agent with an abundance of homes in inventory is likely to work hardest so sell those that pay the better commission, so haggling too hard could backfire on the seller.

To take a middle course, think about listing the home for sale on your own and offering a 3% commission to any agent who produces a buyer. In many cases, that’s all the agent gets anyway, since the buyer and seller’s agents split the commission.

Buyers, of course, can afford to be pretty picky and to hold out for the best deal. But that doesn’t mean this is a great time to enter the market, as the overabundance of homes and shaky economy could be leading home prices into another dip.

In normal times, experts say it takes four or five years for rising home prices to offset the costs of buying a home and later selling it – things like appraisals, mortgage application fee, title insurance, real estate agent’s commission. But that assumes prices rise at an average rate of 3% to 4% a year.

If you were to buy a home now and prices plunged 10% before starting to recover, which some experts say is possible, you might need an additional three years to break even. So it may not make sense to buy a home unless you expect to be there for eight or nine years.

Today’s buyer can get a mortgage at an extraordinarily low rate, around 4.5% for a 30-year fixed-rate loan, according to the BankingMyWay survey. Your real estate agent may point out that at this rate, it costs only $51 a month to borrow another $10,000. But beware the sweet talk: if you spend $10,000 more to buy, that’s $10,000 less in your pocket after you sell – no matter how low the mortgage rate.

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