Be very careful on what you hear from others when it comes to the real estate market
There is some news out there from realtors and so-called experts advising buyers to maybe wait for a year or so. This kind of stuff angers me for many reasons. Here is a question I just read from a potential home buyer:
"Where do you think home prices will be by the end of this year and by next June 2011 in New Jersey."
Answer by a realtor :
"I'll go with down 3% end-of-year and 5-6% by next June. Employment number continue to be terrible, so there is no hope of appreciation for the short term. There is also more and more inventory which will add to negative price pressure."
Nobody has a true crystal ball. All many of us can do is speculate, use our knowledge, expertise, and common sense. But if you are dealing with someone that doesn't look at something from both sides of the fence, to give you good knowledge and food for thought, it could cost you thousands of dollars.
Trying to determine when a good time to purchase a home can be frustrating at times. Asking yourself, if we wait a tad longer, we could get a better deal. What the realtor stated above, I will not disagree with. There is some logic to what he stated. But giving you this information and not taking it to the next level, could make your decision a bad one. Let's explore it some more.
Comparing future depreciation of homes by 3% to 6%
This scenario is taking into consideration that you are currently renting or that you own a home. So if you bought a home now and compared it to buying a home in 6 months, by December 2011, you would have gained slightly on the difference of equity by buying now. If you take in account the 3% difference in the home price in 6 months from now, and the fact that your payment would be $33.32 more a month, you would have spent $399.84 more in mortgage payments. Yes, you would have bought a house for $7,125 less with the 3% depreciation, but by December 2011 that difference would only be $5,044. Then subtract the $399.84 in extra payments, then that difference drops to $4,644. KEEP in MIND - You will also be starting an interest deduction sooner if you bought now also, which I didn't figure into the whole equation. Which means you would write some of this off in 2011 which you would not have until 2012 if you bought at the end of the year. (my main focus was just showing if you bought now than in 6 months from now)
Summary : You need to ask yourself these questions.
- Why are you buying a home?
- Can you actually afford to buy a home now?
- Focus on your mortgage payment and not your interest rate. Meaning, what mortgage payment are you comfortable with.
- Review your goals. Your 3 yr, 5 yr, and 10 yr goals. The average person stays in their home for 6.7 years.
Overall, you hear so much talk about people being upside down in their homes. Ignore this and go back to my questions, the main reason to why you are buying a home. It's normally a long term investment, a place to grow with memories, to raise a family, and so many other reasons. There is no crystal ball that tells you what interest rates will be in 6 months or where home values will be. Think clearly before listening to just one side.
Buy now or wait ??? If I was in the market to buy, felt comfortable, had all my ducks in a row, I would buy NOW.
KEY REMINDER : Not all real estate markets are the same. Some values have increased in the last 6 months. Some haven't moved as much as other areas since 2008, and some are still dropping. Deal with a real professional realtor that knows your market.
For good reading :
Mortgage Interest Rates - Mortgage Market Reports - June 29th, 2010
I have BLOWN a gasket in Real Estate !!! Using FHA loans & being upside down ?
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Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc
_____________________________________________________________________________________________________________________________
FOLLOW ME ON FACEBOOK
- FHA Loans - USDA Loans - VA Loans -
- Energy Efficient Mortgages -
- Conventional Loans - 203 k loans -
- FHA Home Loans - Mortgages -
Experience & Knowledge at its BEST !!!
Follow me on:
______________________________________________________________________________________________________________
For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors
Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc
For starters every market is different. Many markets are healthy, foreclosures nil like rural state, like Maine where houses are soooo much cheaper. You can buy a quality home in the $40's, $50's and nothing is wrong with it. If you rent for a year or more, that is cash in the trash. If rates to buy are historic lows ( a friend of mine just got a home equity loan and he is crowing about the 3.7%..unheard of low that won't last forever). So experts, media trying to make one giant market in a 50 state nation is just words, predictions for whoever listens. Get away from the water cooler talk. Start owning, do the best deal you can in todays market, get your financing in place and start building equity, create the best hedge against inflation known to man...real estate. When brokers repeat these rumors, you help the rumor mill. What is the market in your area like..you are the professional expert in your market..the one that counts. not some NYC professional of economics on CNN as the sole authority.
Everyone has an opinion about the housing market and home values. I agree with you Jeff, unless you have a crystal ball, you are only speculation about what is going to happen. Don't do it.
To any homebuyers that read this posting, if you have the want or need to become a homeowner, the best time is now. You can see what home prices and interest rates are today. Find the right home for a price that is affordable to today. As the economy improves, which I believe everyone wants Interest rate are more likely to increase and housing prices would most like increase as well. Only if you want the economy to decline more, should you hope for lower home prices. Jeff warns be very carefulof what you hear from others. With low rates as they are today and home prices having declined, I believe the upside risk is greater than the risk of higher prices and higher interest rates. Just my opinion, as Jeff says look at everything and then decide what to do.
Jeff, Great post.
ANDREW... . first off, I am not going to disagree, that every market is different. Another great point, that rent money is thrown out the window. Overall, you make some very good points. And me hanging around the water cooler... this is where I get some of my posts from. ;o)
TERRIE.... . what do they say about opinions? lol Anyhoo.... these future crystal balls kill me and in some cases, is what got some people in trouble. thanks
TIM... . Something that I didn't really talk about in my post, that home prices have dropped. Overall, we both agree, that the larger risk would be to wait. thanks and thanks for that polite compliment.
It's the same type of thinking that made every one rush and pay ridiculous prices during the boom. Called the herd mentality. Following the herd can lead you into dangerous waters.
You always lay it out so good. I hadn't heard that "rumor" yet, but too busy with the wedding.
One thing I have learned is that my crystal ball is BROKEN!
So let's see, if I wait a year you predict my house payment is going to be $5 cheaper. Yay!
If my financing program has changes in underwriting in the next year then I can NOT get a loan. BOO!
If interest rates rise above 5% I haven't saved a thing. BOO!
Jeff, thanks once again for highlighting the important ideas that the headlines fail to mention. It is a GREAT time to buy a house now, if that's where your needs are. No one knows what tomorrow will bring and we've seen from experience that tomorrow may take the homeownership opportunity away from many.
Keep it up dude, and have a great weekend!
Gerry Suarez, Jr.
Your FHA Loan Pro!
GABE.... I could partially agree with that. Although I haven't seen much of a heard mentality in regards to this kind of thinking, but there are a few out there stating these opinions. And I am glad I read some Trulia questions & answers, because it gives me some good blog materials.
MISSY.... I wouldn't really call this a rumor.. but I have heard some people make statements such as this, telling people to wait or that values should drop more. Which would put these kinds of thoughts into people's heads. And thanks for the polite compliment. PS. And good luck with the wedding.. what. July 9th?
RENEE.... . gee, I threw my crystal ball out 3 years ago. And yes, as per your comment, so many things could happen. Hey, I have no problem in what this person said, but my problem is that it was so one-sided... not giving someone both sides, explaining the differences...
GERRY aka Thomas mortgage... . I love breaking stuff like this down, to give a different perspective, so people have the material to make an educated decision and not just because one side or thing sounds great... and yes, it is a great time to buy... values down and the lowest rates... thanks and Happy 4th to you and your family.
That's the trouble with the internet - suddenly everyone is an expert!
Thanks for explaining it like this - without a mortgage professional involved everyone guesses and interprets things their own way.
Jeff - I hadn't heard a specific rumor about pricing, and it's pretty hard to say what the future really will look like given all the various factors that can impact it. Trying to play the guessing game can be pretty dangerous, and you won't know if you missed the "best": time to buy until it has passed.
That said, as you point out, a focus on what your goals really are will help steer you in the right direction. For those who do not plan to sty in a home for long, I would no recommend buying. But in our area with the inventory, prices (compared to 4-5 years ago), affordability, and interest rates, for many it IS a good time. Waiting for lower prices, with a good potential for higher interest rates, may not work in your favor.
Jeff
Different perspectives in combination with facts help buyers make informed decisions. When they are comfortable and ready to pull trigger. That's an individual decision. Sometimes based in rational decisions and sometimes they are not.
This is making the assumption that prices will not change as interets rates do.
If a fixed mortgage payment sttops buying a $100,000 house and suddenly only buys a $85,000 house why would house prices not drop to meet the changing ability to buy at that price? It has already happened. That is part of why houses have dropped part way.
Tight lending standards make this much more likely than house prices remaining steady in the face of declining buying power.
One of the things that gets my goat (what DOES that saying mean?) is when agents answer questions from consumers halfway across the country. Do these agents not realize that "all real estate is local"?
There's a Texas broker that always jumps in to answer questions about my local market, but he's just one of many people who do that (who have no clue about my market). Heck, the real estate statistics are very different in the four adjacent zip codes where I focus, and sometimes I have to look at one of my recent market studies before I can answer a question - but here comes this cowboy from Texas who spouts off an answer about the real estate market in Maryland...