Buy Now? – Consider Some Facts
by Evan Vanderwey on 16/12/09 at 10:30 pm
The expression Perfect Storm usually has a negative connotation; after all, storms are bad. But in the real estate market today, the perfect storm of price, rates, and incentives may make buying a new home a very good thing.
Why NOW is a great time to buy…
1. It’s a Buyer’s Market.
And it has been for some time. With fewer dollars chasing more houses, inventories remain high, prices low, and sellers motivated. Timing the bottom of the market is next to impossible, and even if you hit the precise bottom, there’s always the interest rate to consider. So while you’re waiting for the market to hit bottom, rates may be up and wiping out your gains. But if you’re keeping an eye on both prices and rates, you’ll see that right now just about everything favors the buyer.
2. Mortgage Rates are at Historic Lows.
Buying a house has never been more affordable, but it’s not just prices that are low—mortgage rates (the cost of borrowing all that money) are also at a decades-long low. Keep in mind that low rates don’t necessarily mean easy credit. Lenders are wary—looking for good credit scores, hefty down-payments, and established income before they’ll extend credit. But if you qualify, the terms are excellent.
3. Builders are Motivated Sellers.
Like the rest of us, builders are in survival mode, and survival means protecting the essentials—credit, brand, and reputation. So home builders are offering steep discounts in order to unload their inventories. This is an opportunity for the buyer to be aggressive. A low-ball offer is more likely to be accepted when the seller is more motivated by the desire to stay in business than by profit.
4. Federal Tax Credits Have Been Extended.
Both first-time and repeat buyers today have considerable tax-credit opportunities—until the end of 2010, at least (there is a phase-out provision, so check the dates). The first-time home buyer credit of $8,000, originally slated to end November 30 of 2009, has been extended, and a new credit of $6500 is now available to repeat-buyers who have lived in their current home for 5 consecutive years out of the last 8. Designed to jump start the market, these incentives won’t be around forever. So that low-priced home you’re considering is now on sale, and for a limited time only.
5. The Cost of Renting is NOT Dropping.
While house prices are dropping, rent prices have remained fairly stable. We’ve seen the uncertainty in what has always been perceived as a solid investment—home equity. But all investments require uncertainty (it’s called risk, and it’s what allows for a return). The renter, choosing zero risk, is also choosing zero return. Today’s historically low prices and rates allow the renter to move into more house than ever before, and begin to build equity while doing it. There’s simply never been a better time to move from renter to home owner.
So if home ownership is a part of your plans, it may make sense to take action now. After all, it may be a long time before we see all of these elements align like this again.
