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Should Real Estate Buyers Buy Now or Wait?

Northridge Real Estate and Homes for sale in Los Angeles County
Brought to you by your Relocation Specialists Jana Davis and Marcia Demerjian
Visit our website www.JMTEAM.com
 

Think you can "wait out" the high home prices to get a better deal?

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Mortgage Rates, Not Home Prices, are Buyers Worst Enemy In Affordability

With all the talk of softening markets, dropping values, many buyers have decided to wait to buy believing that lower prices will help them along the path to home ownership.  Instead of prices, buyers should really keep their eyes on interest rates - the most powerful component of the home-buying process.

In a nut shell, if you wait for prices to level out or drop while interest rates increase -- your ability to purchase that now-affordable home may have just vanished with interest rates running up along side the price drops.

Lets look at your purchasing power:  For this example we will use a household annual income of $100,000 to demonstrate this point.  This is a well qualified buyer looking at homes in the $450,000 price range.  The buyer hears the media blitz that home prices are dropping and/or it's a buyer's market  and decides to wait for prices to drop $50,000 before they buy, hoping to get a better deal.

MBAA is predicting 6.7 percent rates into this year. However, at that amount, the above buyer will only be able to buy about $399,411 worth of house. Last June (just a year ago) that same borrower could have borrowed $450,000 at 5.63 percent on a 30-year fixed mortgage. Neither the buyers income nor the home price decreased the buyers buying power did -- just the interest rate.

Two words of advice. To those of you who are thinking about buying -- look at all your options and run your personal numbers. How long can you wait for prices to drop while interest rates are on the march upward before you're priced out of the home market again?  The housing inventory is on the rise in our market area. Smart sellers are willing to negotiate again -- you may be able to get that lower price just by asking for it.

Secondly, if you know you're going to buy -- lock in your interest rate if possible. By locking in you save money by having a lower rate for your mortgage. Some mortgage programs let you lock in for up to 120 days.  Check with your lender to see if you can secure your rate!

Marcia and Jana would like to know your view on the changing Real Estate market.  Are buyer's waiting to buy?  Did you wait and now got a good deal or did you lose that dream house?  Please feel free to post your view point. We would love to hear from you!

 

Published Wednesday, December 20, 2006 6:56 PM by Your Real Estate Team

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Wednesday, September 12, 2007 1:17 PM by Lilly Green

# re: Should Real Estate Buyers Buy Now or Wait?

I'm sure this is your opinion because you sell homes for a living and people like you made money by convincing people to purchase home they can not afford as long as you get paid. What you are saying above does not make sence. I have a degree in economics and know a little about how the economy works. The prices will adjust themselves to what the home are really worth. And as far as the interest rate, I think the prices will fall so much that even if the interest rate rises it will still be more affordable to buy a home. After you guys have gotten home buyers into horrible situations where they are losing their homes now, you still have the nerve to say buy now and don't wait. I for one am waiting and there are millions like me which is why the prices will drop way lower than you think.    

Tuesday, September 18, 2007 10:15 PM by Your Real Estate Team

# re: Should Real Estate Buyers Buy Now or Wait?

Hi Lilly,

Thank you for your comment.  If you are in the position to buy a home are you going to wait to buy in a "seller's market" or do you think it may be better to buy in a "buyer's market?"  The investors are buying right now!  The interest rates are still low.  It is a great time to buy a home!  If you are not ready yet, make sure you watch the rates, not just the prices.  It can and will make a difference.

We agree with you the market is adjusting.  As buyers control the prices along with supply and demand.  We have more supply right now than demand. So prices have dropped.  However sellers control this to a degree also.  If a seller does not have to sell, at one point they will say enough is enough and pull their homes from the market.  The pendulum swings and there will be more demand than supply.  This is a common cycle.  Our market has dropped in the 70's, 80's and 90's.  For 10 years the prices have been steadily going up.  Last year they started going down.  Prices drop then go back up, but will we ever see homes for $150K again in the San Fernando Valley?

As far as being responsible for people losing their homes.  Most of us are not lenders, mortgage brokers, or bankers.  We are Realtors and even though we are in a connected field, as most people need loans to buy a home, our job is to find and negotiate the best home for the money that meets our clients needs. The buyers are responsible to set up their financing.  We have always suggested that they shop around.  Call a mortgage broker, check with their bank or credit union, or direct lender.  Ask questions then choose the best lender with the best loan program for their needs and circumstances.  

Sub-prime lenders had money to lend.  They set up programs that required no documentation on the buyer's income and accepted low credit scores.  100% financing to boot.  These may have been good loans for people who actually had the income, but did not have the documentation to prove it.  Many of the people who are now losing their homes did not have the income they claimed and many were not credit worthy.  We are not sad to see these loans go by the wayside.  

Many people losing their homes right now used them as ATM machines. Talking out the equity with equity lines of credit.  Adjustable rate mortgages adjust.  They can not refinance as the equity is gone.  

Lastly there are people who are losing their homes because they bought them in the last year or two and have either lost their jobs, are divorcing, or have suffered a death in their family and can no longer afford their mortgage on their home.  They can not sell their homes in the conventional way because there is no equity.

No matter why people are losing their homes it is upsetting.  Nothing is more heart breaking then to see a family lose their home!  Just as nothing feels better then handing over the keys to a family for their new home!  

To keep up with the interest rates please feel free to check our website under the Real Estate News tab.  You can find more information on lenders under the Find a Lender tab.  To keep up with the prices use our Home Search tab.  The more a buyer knows about what is going on in the market place the more likely they will make the best decision on when it will be the best time for them to buy!

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