An Interesting video from CNN on Housing Prices

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Time is of the essence

Consumers should be shouting off the rooftops about the fantastic deals they are being offered in both housing and mortgage rates. Mortgage rates have dropped to the lowest level since the 1970s. Housing prices are the lowest they have been in years, affordability is available and offered. So why are so many consumer waiting? I believe many consumers are waiting to see what will happen. They want the best deal possible so they are on the fence waiting for rates to drop even lower and home deals to get even better. But sadly they may be missing out on something that will not last much longer.

According to a recent poll done by local real estate industry professionals asking when they think the market will start to recover (meaning the sellers will once again get the upper hand) 25% said mid 2009, 25% said late 2009, and 37% said late 2010. If these predictions hold true we could see a shift in the next year towards stabilization of home prices and mortgage rates. This means that sellers will no longer give away the firestorm deals and incentives they have in the past 2 years and it is likely that with this stabilization the Fed will bring the interest rates back to a normal level we have seen in recent years rather then the under 6% range we see now.

So like any other investment there is risk and in a market like this the risk is much lower for buyers then it is for sellers. The deals are out there but many consumers might have noticed that less and less builders are giving away their homes and re-sale sellers are taking their homes off the market until the prices stabilize. The time is now; buy now or you might loose money later.

Buyers are seeing that there are a lot of great resale deals or perhaps hearing about all the quick sale/ foreclosures that are out there. Yes quick sales are up meaning that the amount of distressed properties are up. Many people are struggling to make their house payments because of all the crazy loans they were put into are now adjusting. This is both bad and good. The bad news is we never want to see this many people struggling with their payment, this is bad for both them, the banks, and the community. However President Obama has pledged that between $50billion and $100billion will be used to help boost efforts in combating the increasing mortgage foreclosures. The good thing is that an increase in Foreclosed sales and closes in the area means the inventory will soon be going down. The idea is the more inventories we wash out the more stable the market will be.

There is a pent up demand for homes out there and anytime now consumers will realize that now is not only the time to buy but the BEST time to buy. So as the title of this blog suggest, time is of the essence. Buy now or soon or else you could miss out or find yourself purchasing your home with a higher interest rate and a higher price.

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ANSWERS TO COMMON HOME BUYING QUESTIONS

Q: Shouldn’t I wait until home prices go even lower to buy?

A: No. Just as no one can accurately predict the peaks and valleys of the stock market (name one person who sold their tech portfolio in April of 2000), the same holds true for housing. If you wait for what you think is the absolute best deal, you could end up waiting for years. All the market fundamentals show that now is a good time to buy – prices are down, interest rates near historically low levels, and there are lots of homes to choose from.

If you buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation. Remember, those who purchased homes in the early 1990s during the last big economic and housing downturn came out as big winners.

Q: Doesn’t it make sense to wait out the market until can I get the same price on my home that my neighbor got when he sold a year ago?

A: No. It’s always better to trade up in a buyer’s market. While the value of your house has fallen, the prices of higher-end homes have also dropped. Here’s an example:

Your neighbor sold for $300,000. Let’s say values in your area have dropped 10 percent, so you could get only $270,000 for your home today. You have your eye on a move-up home that previously sold for $500,000, but now is selling for $450,000. If you sold your home today for $270,000 and purchased the larger house for $450,000, the difference in price would be $180,000.

But if you waited to recoup the 10 percent value on your home and sold it at $300,000, chances are the move-up home would also increase in price 10 percent to $500,000. That’s a $200,000 price difference. So by selling today, you would actually save $20,000.

Q: Interest rates keep going down. Shouldn’t I wait until they go even lower before I buy a home?

A: Interest rates for 30-year, fixed-rate mortgages are currently around 6 percent and are extremely favorable for buyers. In fact, they are hovering near 30-year lows. But waiting to time the market is a dangerous game. Even those who follow the market for a living can’t figure out when interest rates will bottom out. If they could, they would all be multi-millionaires.

And home prices don’t necessarily move in unison with interest rates. So, if you decided to wait to purchase a home and the price dropped $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up by a half-a-point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.

Q: I have $10,000 to invest. Should I put that money in the stock market or buy a home?

A: Purchasing a home is by far the best long-term investment. For example, say you use that $10,000 to purchase a $250,000 home, and the house appreciates a modest 3 percent during the first year. That means after one year, the house would be worth $257,500 – a gain of $7,500. By contrast, putting the same $10,000 in the stock market and posting a similar 5 percent gain would only net a $500 return on investment.

And don’t forget the tax incentives. In most instances, all of the mortgage interest and property taxes you pay in a given year can be fully deducted from your gross income to reduce your taxable income. These deductions can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment.

Q: I’m a first-time buyer and still can’t afford the type of home that I want. Is it best to wait, keep renting, and hope that prices will get even lower?

A: If you continue to wait, you may never be able to afford to get into the housing market. Even as home prices are currently moderating or falling, depending on where you live, rents continue to climb. When you buy a home, you are also purchasing price stability, knowing that you will pay the same monthly payment for the life of your 30-year, fixed-rate mortgage.

Once you become a home owner, you are able to take advantage of the tax deductions that homeownership offers, and you begin to build equity in your property.

With so many homes on the market to choose from, your best strategy may be to scale back expectations for your dream starter-home. After a few years, you can use those equity gains to sell your starter home and move into a bigger house. The sooner you make the jump from renter to home owner, the quicker you begin to create and build up wealth for your family.

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