I just finished watching Spencer Rascoff’s interview on Bloomberg where he shared data with regard to mortgage rates and real estate values.
He felt that we won’t hit the floor for values until late 2010, but it varies by region. He gave an example, showing that Boston had hit it’s floor in early 2009 and is already rising. This is an important factor for homeowners to consider when looking to buy or sell a home
Another point he makes, which I’ve been dreading for months, is rates will likely not stay as low as they are right now without another intervention from the Federal government. Currently, inflation appears to be under control and the government is still purchasing mortgage backed securities. This helps the price of mortgage backed securities stay high which keeps mortgage rates low. However, the government’s current commitment to buying mortgage backed securities will end soon. We also should expect many of the government funded programs to increase inflation. As the price of mortgage backed securities drop and inflation kicks in, mortgage rates will start moving up.
Let’s do a review. Rates are low, but are expected to go up soon. Values are low and are expected to hit their rock bottom (nationally) in 2010. This leads to the question of many first time home buyers, “When is the right time to buy?”
It’s hard to pinpoint the best time to buy a home, but it is easy to make a decision if you want to base your decision on facts alone.
Here are some facts to consider:
- 30 year Fixed mortgage rates have stayed between 4.5%-5.25% for almost a year.
- Home Values have continued to decline but recent signs show the value reductions are slowing
- First time home buyers have a $8,000 tax credit that is currently set to expire on December 1st of this year
Is there a chance that values will continue to drop? Depending on the area, absolutely. Can interest rates maintain these levels for a little longer? Sure they can. Will the government extend the first time home buyer tax credit? Potentially, and maybe even likely.
That said it’s hard to imagine that all three factors will continue to exist in perfect harmony as they do now. Whether it is rates, values, or the tax credit; something will give eventually. My guess is that rates will be the first thing to change. In any event, every buyer must consider the consequences of sitting on the sidelines for too long. Buying a house for 5% less in price next year at an interest rate 1% higher will raise the cost of home ownership considerably.
I can’t tell anybody when the right time for them is. Personal, financial and professional factors are different for everyone. One thing we know for certain - there will be thousands, if not millions of Americans wishing they had made a different decision
What that ultimately means is if you can, you should start asking yourself “When?”
Hey there , i wanted to stop and say thanks for that read this is one of the best websites ive found in a long time.
Where can I go to have no cost, unbiased home loan tips? Almost all over the place on the web is trying to sell me a product.
Clifford,
I totally agree. Most professionals in the mortgage and real estate market always are selling something.
I hope this blog doesn’t come off as too “sales” oriented. The majority of people who read my blog and email me for tips/help aren’t even in states I’m licensed in.
The reality is most of the responses you will get will be sales driven, but you can filter through forums to find some good answers. The forums on Zillow and Trulia are decent. I try to contribute to those forums when I can.
One thing to remember is that blogs are written from one person’s point of view. I do share my opinions, so they are VERY biased…LOL. However, you’ll learn that many of my opinions are not a sales pitch.
For instance, I recently wrote a blog about how bearish I am on the Seattle condo market:
http://www.keaneloans.com/2009/09/05/downtown-seattle-condos-the-next-local-market-to-crash/
Not only am I warning consumers with my opinion, but this is a market I originate home loans in! Not really a business friendly blogpost.
I also wrote a post about how I could see rates going back down on Zillow but only at the cost of a double-dip recession, which isn’t friendly for the housing market. Although lower mortgage rates is good for my industry, a weak housing market is not.
http://www.zillow.com/blog/mortgage/2009/12/02/when-the-fed-stops-buying-mortgage-bonds-mortgage-rates-will-go-up-or-will-it/
Anyways, if you want many answers to your questions, post on those two forums. I can’t always guarantee quality answers in return, but it is free and you may find some decent responses. You can always email me or post a question on one of my posts if you want my help as well.
-Keane