Negative news about the housing market may seem like it will never end. The most recent national housing data shows home prices continuing to drop as did the number of homes sold. Foreclosures remain one of the biggest factors dragging us down, and there’s also the huge number of distressed homes creating supply overflow. If you peel back the layers and really look at all the bad news, you may in fact see some compelling reasons for getting serious about buying right now. For example, home prices have dropped so low in many areas that it now makes the cost of buying a better financial deal than renting.
Crazy or Crazy Smart?
Given what is still unfolding, waiting on the sidelines to make your move after the last of the ugliness is played out seems like a pretty smart strategy. But while you’re laser focused on the idea that home prices will be lower in the coming months — which you may well be right about – the question remains how much lower are they going, and what other important home-buying factors are going to be as advantageous a two months or year from now.
If you are pondering a home purchase, you might want to make a move sooner versus later. Here are six reasons why now just might be a smart time to make your move:
1. Renting isn’t always a great deal. This is all about Econ 101: Demand for rentals the past few years has increased — a function of foreclosures and fewer existing renters making the decision to buy – and supply hasn’t kept pace as there has been little new construction since the financial crisis hit. That’s pushing up rental prices. Mark Zandi, Moody’s Analytics chief economist expects rents to increase an average of 5 percent over the next year and some economists are predicting increases in major metro areas of more than 5 percent. That’s likely going to exacerbate an already interesting trend playing out in many markets.
2. 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. Scary, indeed. Let’s stop looking in the rear view mirror because what’s important is what comes next, not what we’ve just come through. And no one is suggesting we have an additional 30 percent to go in price declines. Many economists are predicting about another 5 percent slide in home prices. And let’s be clear, I have not heard anyone suggest 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.
3. Historically LOW Mortgage Rates. Right now the 4.5 percent interest rate on a 30-year fixed rate mortgage is amazingly cheap. Most economists predict that rates will rise through the end of the year, with some thinking the 30-year fixed-rate mortgage could be 5.5 percent by the 2012. Higher rates can affect loan eligibility by increasing the monthly mortgage payments and your ability to qualify for a loan.
4. Qualifying for a mortgage is likely to get harder, not easier. In the past 18 months, massive legislative changes have affected the mortgage landscape. Anyone seeking a mortgage can expect to do more paperwork when planning to purchase or refinance a home. Borrowers are also being asked to provide even more documentation, including proof of identity and residency. Add to these the higher credit scores required before you will even be considered as an applicant.
5. Scary national statistics are especially deceptive right now. RealtyTrac 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 sold for. But peel back from that ominous headline statistic and there is a more nuanced story playing out that goes to the heart of the old maxim: All real estate is local. The Charleston tri-county area is not experiencing the same level of declines as most major metropolitan areas.
6. Less competition. There may be plenty people dropping by at open houses these days, but the anemic sales pace is proof that there are few serious buyers. That makes it less likely that you will wind up in a bidding war for your dream home. It also means you may have more room to negotiate with eager sellers. Waiting to dive in could mean that you find yourself in a more crowded pool of buyers. It’s just common senses that once there are clear signals of recovery, demand will pick up. So, bottom in is you may not have much time to wait or you’ll find yourself telling your friends “if only I had purchased 3 months ago – I would have scooped up a bigger house on a larger lot.”
Tags: agency, buy, buyer, buyers, carolina, charleston, economy, estate, first, folly, foreclosure, home, janine, lender, mabe, market, median, mortgage, negotiate, new, price, real, right, sale, sales, short, south, time, to, vacation, west ashley
Avg. Sales Price: 379,000
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