Why They Are Saying to Buy A Home Now
Despite what appears to be a non-stop wave of tough news regarding real estate, four major media players have come out this month with the same advice: It Is Time to Buy a Home! Here are the four articles and a breakdown as to why the advice makes sense.
The Wall Street Journal: Why It’s Time to Buy
CBS Money Watch: Why the Time to Buy is Now
Forbes Magazine: 9 Reasons to Buy a House Now
National Public Radio: For Many, It’s Still a Good Time to Buy a Home
With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.
Interest Rates
Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.
Lending Standards
The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:
- The qualification process for loans will become more difficult
- The cost of a loan will increase
Bottom Line
There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).
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When I click on the first link, the eall st Journal one, it sort of whigs out……..doesn’t come up, then coes up black, and quits responding.eventually comes around. othrs work fine
Brenda,
It’s working fine for us and we checked on several computers.
What do you think a good secure down payment should be?
@Sarah,
Obviously, that depends on the financial situation of the buyer. According to studies which looked at the latest data available (2008), the difference in delinquency rates between a 5% and 10% down payments is .2%; between 5% and 20% down payments is .6%. Though any difference matters, I think many people overestimate the significance of a larger downpayment.
Hi – We have a 3 bedroom 2 bath condo in a great area of NJ. We would like to buy a house, but would like to sell the condo first. We are noticing that should we sell we will have a huge loss. Do you think it is worth it to wait a couple yrs to sell?
Excellent article and one everyone should read who is on the fence as to buying a home or not.
Veterans can buy without a down payment and the rates are so low that with the tax benefit of a mortgage it beats renting.
Steve,
Great article! I reprinted on my blog as this was definitely worth sharing with potential buyers and sellers and all of my readers in the Northern Virginia area. Especially with the recent reports of the D.C. Metro area having the most solid real estate market in the country.
Thanks for the information. I am dealing with a client who is overvaluing her house by $26,000 which I explained will not work because the comps does verify the cost of the house. If she lists lower, we can sell faster and catch the low rate for her next new dream home. I am sending her to our mortgage person so that she can accept a more realistic price for her home. cml
Sarah,
If you don’t have at least 15% to put down it makes no sense, and is actually counter-productive, to put down more than you have to. In most cases that will be 3.5% on an FHA loan.
I know that putting down less is the opposite of “common sense” but it actually makes sense in the long run. Our primary financial goal should be financial security, not having a slightly lower payment or owning our home outright. Putting down more than we have to only pushes that carrot (true financial security) further away, not closer to reach.
It not something I have the time to explain here but I would consult your financial planner about it before you move forward with anything. How your mortgage plan fits into your overall financial plan is very important, and can actually be more important than the rate/fee you get from your lender.
Sincerely,
Greg