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.

One of the financial magazines I read weekly is Business Week. It can be a little bit politically charged, but depending on who’s writing the economics ‘short’, it can be very good.

This week’s is written by Peter Coy. Google his name and you’ll find him to be a bit pessimistic on the economic recovery and not quick to get on band wagons that others are riding. His is a level-headed report of the facts, and he doesn’t generally over play his theories. Just the kind of guy you want to hear good news from.

The article I’m referring to – linked here – will not disappoint you. It explains simply and clearly why Bernanke is so committed to a VERY low rate standard.

His reason in a nutshell:  The economy at large has a ton of excess capacity right now, which will take a long time work through. What do we mean by capacity? You see it practically as high unemployment and high inventory of homes on the market. Both examples are resources that are more plentiful, more in “supply” than we need. It will take a lot of economic growth just to work through what is already here and to use up this excess.

Another reason for extra capacity is the recent rise in productivity. The productivity numbers rose again this month, though they were expected to remain flat. So, not only do we have an excess in resources, we;re also getting more efficient at producing them. This will create slow growth in the economy, in Big Ben’s opinion, and support for his theory is growing.

Take five minutes and read the article. You might also consider who you know who might appreciate this information.

Some concluding thoughts:

WHAT IF BERNANKE IS RIGHT?
Then we’ll have slow economic growth and keep interest rates low for some years to come. We can live with this. Let’s be honest – putting our Lansing hat back on – we’ve been living with it for some years already. But here is where we might see light on the horizon – a bright spot. It may just be Mid-Michigan’s turn for moderate jobs growth. If this happens while the rest of the country (world) is lagging, then we could have both rising home values AND low rates. Let’s not be too much the ‘realists’ to think this couldn’t happen.

WHAT IF BERNANKE IS WRONG?
Then the economy at large heats up, rates rise sooner – not a lot, most likely, but sooner. AND our 401k’s rebound again. We can handle this too! Even if he’s wrong, 1982 inflation and rates are not a likely event based on the slow growth expectations.  At least not for a while.  Most of us who need a fixed rate will get one while they’re low and few will remain by the time anything wild happens.

WHY IS THIS IMPORTANT TO ME?
If you are buying a home or refinancing a mortgage right now, then you should still consider a fixed rate.  Mostly because they’re very low right now (see my blog 24/7 for daily averages).  If you are currently in an Adjustible Rate Mortgage, you should get some advice as to what to do.  Your rate will likely be very low for the next few years.  Let’s not allow fear or greed to dictate these decisions.  A good level-headed decision based on the facts of your situation and the realities of your goals is what is needed.

LAST THOUGHTS
Let’s also be very honest with ourselves. As “smart” as Mr. Bernanke is, he does not know or hold the future.  Only time will tell if his contributions were beneficial. He’s helping us navigate right now, and I am thankful for that, as am I thankful for all like him who are in positions of great weight and difficulty. I would urge us to remember the phrase written ON our money when we think ABOUT our money:  “IN GOD WE TRUST”.  After all, low rates, housing credits, and three shifts running at General Motors will all pass away in time.