We've all heard the doom and gloom predictions from the media about the current housing market. Don't let that scare you! Good news doesn't sell - sensational bad news is much more exciting.
This is the way I see it: (and I'm in this business every day)
We haven't seen interest rates this low in decades, if ever. Home prices are comparable to prices from the pre-boom era.(Early 2000's and earlier) We don't know if house prices are going to dip any farther but if you are looking at your home as a long term investment - a place you are going to live for the next 5 -10 yrs, the situation is very favorable. Interest rates are not going to stay this low forever - and if you think a half point or a point difference isn't a big deal, think again.
Even if house prices dip lower in the next year or two, if interest rates go up, your monthly payment could actually be higher than what you would be paying with todays prices and rates. And remember, your loan term is usually 30 yrs. So you would be paying that extra interest every month for 30 years. That adds up.
Plus, in the meantime, you would still be paying rent every month.
This is a sample of current interest rates offered by a lender that I frequently work with:
Rate__ APR Monthly P&I
15 yr fix: 3.625%_3.978%_ _ $733.44
30 yr fix: 4.250%_4.379%___$514.14
FHA 30: 4.000%_4.142%_ _ $491.94
The payments represent a $100,000 loan, including Principal (loan payment) and Interest. So, wow!
Another shocker - You don't have to buy a foreclosure or a short sale to get a great deal. Traditional sales, many of which are move in ready, are competing with foreclosures and short sales. This competition is bringing the prices of traditional homes down. The traditional sellers don't have a choice in the matter - because appraisers are using foreclosures as comparables when they determine the value of the home. So even if the traditional seller had a buyer willing to pay a much higher price for a move in ready home, it is possible that the appraisal could come in lower than the offer price, because of foreclosure comparables. Then the buyer's lender would not approve the financing and the buyer and seller would have to re-negotiate the price.
Another shocker - You don't have to buy a foreclosure or a short sale to get a great deal. Traditional sales, many of which are move in ready, are competing with foreclosures and short sales. This competition is bringing the prices of traditional homes down. The traditional sellers don't have a choice in the matter - because appraisers are using foreclosures as comparables when they determine the value of the home. So even if the traditional seller had a buyer willing to pay a much higher price for a move in ready home, it is possible that the appraisal could come in lower than the offer price, because of foreclosure comparables. Then the buyer's lender would not approve the financing and the buyer and seller would have to re-negotiate the price.
Another factor - Rental vacancies are rapidly decreasing. NAR ( National Association of Realtors) forecasts that vacancies will decline by almost 1% in the multi-family market over the next year. Remember the law of supply and demand? When supply goes down, demand goes up - and so do rental rates. In many cases, it is actually cheaper on a monthly basis to own a home than it is to rent. Plus some of that payment is going towards your principal, lowering your loan balance and giving you equity. Your rent payment? You'll never get any of that back.
So, instead of listening to the news and burying your head in the sand - think about the actual cost of renting versus home ownership - you might just be surprised.
And if you do decide to call a Realtor, call me. :)
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