We are still in a Buyer's Market, but for how long?
We all wish we had a crystal ball to predict when the real estate market will recover. Unfortunately no one knows exactly when that will happen, but there is plenty of speculation to go around.
"If it is just speculation, why is it so important that I buy now?" you may ask. There are many good reasons to buy sooner rather than later. Not only are interest rates the lowest they have ever been in recorded history, but they are predicted to rise, it is only a matter of time. Home prices are still low, especially compared to the "peak" of the market. However, every "nth" of a point the interest rates go up, the monthly payment will also rise. This means that to have the same monthly payment purchasing year from now as you could have purchasing today, you will have to spend less on the sales price of a home.
Other good reasons to buy now are the Home-buyer Tax Credit, which is set to expire on April 30, 2010, USDA is still offering 100% financing on qualifying properties, the Neighborhood Stabilization Program (NSP) is offiering downpayment assistance on qualifying areas and there are many other programs designed to stimulate the real estate market out there for buyers as well.
Also, lending practices and credit standards are continuing to "tighten up". This means that more and more buyers will be shut out of the market as they become ineligable due to stricter lending guidelines.
-Mortgage Rates: The rate on a 30-year mortgage averaged 5% last week, according to Freddie Mac. Rates are low in part because the Federal Reserve has been buying up about $3 trillion in mortgage-backed securities and mortgage agency debt. The aim is to hold down interest rates and keep mortgages available. But the Fed has no plans to buy any more past March 30, 2010. The likely result is an uptick in rates. Economists at the Mortgage Bankers Association expect to see a 6.1% rate by year end. Such a rise would add about $104 to the monthly payment on a $150,000 mortgage.
-Home Buyer Tax Credit: The home buyer tax credit expires on April 30, 2010 and no one knows if Congress will renew it a second time. To qualify for the credit, you must sign a purchase contract by April 30, 2010 and close by July 1, 2010. First-time buyers get up to $8,000. "First-time" is defined as someone who hasn't owned a home in three years. Move-up buyers get up to $6,500 when they purchase a new primary residence. To get the credit, you have to have lived in the old home for at least five out of the last eight years. The credits start phasing out at $125,000 in adjusted gross income for singles and $225,000 for joint filers.
- Credit Standards: Mortgage lenders have been tightening credit standards, which means fewer eligible buyers. Lenders are insisting on credit scores of 640 to 660 for loans sold to Fannie Mae, Freddie Mac and 620 for FHA guaranteed loans. Those standards are higher than the federal agencies themselves insist on. FHA-which guarantees loans for people with low down-payments-has been raising its own insurance charges to borrowers and demanding higher premiums from people with poor credit scores."
We all wish we had a crystal ball to predict when the real estate market will recover. Unfortunately no one knows exactly when that will happen, but there is plenty of speculation to go around.
"If it is just speculation, why is it so important that I buy now?" you may ask. There are many good reasons to buy sooner rather than later. Not only are interest rates the lowest they have ever been in recorded history, but they are predicted to rise, it is only a matter of time. Home prices are still low, especially compared to the "peak" of the market. However, every "nth" of a point the interest rates go up, the monthly payment will also rise. This means that to have the same monthly payment purchasing year from now as you could have purchasing today, you will have to spend less on the sales price of a home.
Other good reasons to buy now are the Home-buyer Tax Credit, which is set to expire on April 30, 2010, USDA is still offering 100% financing on qualifying properties, the Neighborhood Stabilization Program (NSP) is offiering downpayment assistance on qualifying areas and there are many other programs designed to stimulate the real estate market out there for buyers as well.
Also, lending practices and credit standards are continuing to "tighten up". This means that more and more buyers will be shut out of the market as they become ineligable due to stricter lending guidelines.
-Mortgage Rates: The rate on a 30-year mortgage averaged 5% last week, according to Freddie Mac. Rates are low in part because the Federal Reserve has been buying up about $3 trillion in mortgage-backed securities and mortgage agency debt. The aim is to hold down interest rates and keep mortgages available. But the Fed has no plans to buy any more past March 30, 2010. The likely result is an uptick in rates. Economists at the Mortgage Bankers Association expect to see a 6.1% rate by year end. Such a rise would add about $104 to the monthly payment on a $150,000 mortgage.
-Home Buyer Tax Credit: The home buyer tax credit expires on April 30, 2010 and no one knows if Congress will renew it a second time. To qualify for the credit, you must sign a purchase contract by April 30, 2010 and close by July 1, 2010. First-time buyers get up to $8,000. "First-time" is defined as someone who hasn't owned a home in three years. Move-up buyers get up to $6,500 when they purchase a new primary residence. To get the credit, you have to have lived in the old home for at least five out of the last eight years. The credits start phasing out at $125,000 in adjusted gross income for singles and $225,000 for joint filers.
- Credit Standards: Mortgage lenders have been tightening credit standards, which means fewer eligible buyers. Lenders are insisting on credit scores of 640 to 660 for loans sold to Fannie Mae, Freddie Mac and 620 for FHA guaranteed loans. Those standards are higher than the federal agencies themselves insist on. FHA-which guarantees loans for people with low down-payments-has been raising its own insurance charges to borrowers and demanding higher premiums from people with poor credit scores."
CHAD ELLIOT, REALTOR© The Hennepin Group, LLC Keller Williams Realty 17205 Yale Street NW, Suite D Elk River, Minnesota, 55330 | Mobile: (651) 795-1147 Fax: (763) 241-0187 Email: chadelliot@kw.com | |
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