This is an exerpt from an article by Carla Fried. Below are six reasons why anyone who is pondering a home purchase might want to consider making a move sooner than later. Potential first-timers certainly have far easier logistics than current homeowners who need to sell to make a move. If you're under water on your loan, trading up might not be feasible. But there are indeed plenty of current homeowners sitting on ample equity. For them and for potential first timers, here are six reasons why now just might be a smart time to make your move.
1. The worst of the price declines is likely over. From the market peak in 2006, the S&P/Case-Shiller index of 20 housing markets is down 32 percent. Ugly indeed. But what's important is what comes next, not what we've just come through. And no one is suggesting we have another 30% to go. Mark Zandi, Moody's Analytics chief economist recently said that another 5% slide in home prices might be on the tap. To be clear no one is suggesting roaring price gains are on the horizon either. The takeaway is that we're potentially at an important pivot point where we're moving from steeply falling home prices to an extended period of stabilizing prices.
2. Mortgage rates are at historic lows. Right now the 4.6 percent interest rate on a 30-year fixed rate mortgage is beyond fire-sale cheap as is the 3.78% interest rate for a 15-year mortgage. Assuming rates will stay where they are at, or even fall some more, seems a risky bet. Fannie Mae expects the 30-year fixed rate will hover around 5.2% percent by the fourth quarter of this year, then rise slightly throughout 2012 to 5.4% percent or so. The 2012 forecast is 5.7 percent, more than a full percentage point above where we're at today.
If you take out a $300,000 30-year fixed rate loan today at 4.6% your monthly tab will be $1,537. But lets say you instead decide to wait another year or more on the theory prices are heading lower. If during your wait the 30-year fixed rate rises to 5.7 percent you would need home prices to fall nearly 12 percent to come in at the same monthly cost as what you can target now. That's more that double the price decline most market watchers are expecting.
3. Mortgages for pricey homes are heading higher. Even if mortgage rates don't budge between now and the fall, mortgages are expensive homes are still going to cost more. Right now lenders can write mortgages for as much as $729,750 in certain high cost areas and still have that mortgage qualify as a :confirming " Fannie Mae or Freddie Mac loan. That's a big deal to lenders who are typically eager to sell off their loans into the secondary market--and right now Fannie and Freddie are the secondary market. But as of Oct 1, the maximum loan amount for a conforming mortgage will fall back to $625,500. If you intend to borrow more that that you will be shut out of the conforming loan market, and will have to opt for a jumbo loan. Jumbos typically carry higher down payments and the mortgage rate cat me .50 percent higher that the conforming loan rate.
4. Qualifying for a mortgage is likely to get harder, not easier. The goal of Washington in the coming years is to shift more of the mortgage market out of the hands of Fannie Mae and Freddie Mac and into the hands of the private market. It is admittedly too early to know when and what that transition might look like. But whether the government backing is scaled down or disappears all together, that means higher borrowing costs. Moreover, there's already a new regulation being considered that would require banks that want to keep selling 100 percent of their mortgages to Fannie and Freddie to hold borrows to tougher lending standards.
5. Scary national statistics are especially deceptive right now. Realty/Trac reported that 28 percent of home sales in the first quarter of 2011 were foreclosures, and the average foreclosure sale price was 27 percent less than what a non-distressed home went for. But peel back from that ominous headline statistic and there is more nuanced story playing out that goes to the heart of the old maxim; All real estate is local.
6. Less competition. There may be plenty lookey-loos at open houses these days, but the anemic sales pace is proof that there are fewer serious buyers looking to make a deal. That makes it less likely your find yourself in a bidding war today. It also means you can negotiate more effectively with eager sellers. Wait to dive in and you could find yourself in a more crowded pool of buyers. Its just common sense that once there are clear signals of recovery, demand will pick up. Being a little early/ahead of the curve gives buyers more elbow room.
No comments:
Post a Comment