You’re thinking of buying your first home, buying a second home, or buying a investment property … “I’m not quite ready … I’m waiting for the market to settle (read go down more) a bit,” you reply.
You are sitting on a very crowded fence!
Here are some things to consider about the current real estate market, and why it is a good time to buy. And no … I’m not just blowing smoke up your rear.
First off, timing the market is extremely difficult. In fact, if you nailed the top or bottom … you got lucky. Yes you can get close, but you can also miss out on a good deal that was once there. Think about it, if you could time the market, many of us real estate professionals would be retired right now.
The inventory of unsold homes in Joshua Tree, Twentynine Palms, Yucca Valley, the rest of the Morongo Basin, as well as many areas in the country are at historic highs. You, as a buyer have a huge selection of homes to choose from. In our area, if you take out the extremes at either end, we have about 10+ months of inventory.
Prices on these available homes, all except for the few who haven’t seen the writing on the wall, have dropped dramatically in the last 18 months. Sometimes by as much as 20 – 30 % from the highs of the boom market. Builders are practically giving their unsold new homes away … OK they are still making some money, but it is amazing how inexpensive you can get a new home for these days. Then there are “short sale” properties, that are usually a good deal, but do your research. A short sale home is a home that is being sold for less than the mortgage amount and requires bank approval. Add into the mix, especially in this area, the ever growing list of foreclosed/bank-owned properties. You may have to kiss some frogs, but there are some real princes of foreclosed properties available at some very attractive prices. Others just need a bit of cosmetic work.
Are prices going to go down more? Most likely yes they are going to go down more at least in the next six months. But if you are buying a home for the right reasons: 1) you plan on living in it for a while, at least 3 -5 years and 2) you are not buying it to just flip the property, then you are probably going to do well in the long run. The key being long-term! Housing is a long-term investment.
Then it comes to the home loan, at least for most of us. And this is the important part!
First off, it is a huge misconception that the mortgage interest rates are tied to the federal prime interest rate. They are NOT. Prime rate may influence mortgage rates, but the major factor of mortgage rates is the availability of money to lend. And with all the recent problems in the mortgage market, investors are scared to put money in the pot.
Next, it has become much more difficult to qualify for a loan. 100% loans are far and few. Stated income … good luck. With tightening money levels, this will get more difficult. Not to mention appraisers are very conservative, in order to protect their backsides.
Because of all this, mortgage rates have been rising from the low’s of earlier this year. According to Freddie Mac, last weeks average 30yr fixed rate average was 6.45%, compared to the week ending 1/24/08 which was 5.48%. Most of the analyst’s believe we will see continued gradual rate increases.
In the long run, I think you would see that if you could find a good home that meets your needs now. And you can get a good deal on the purchase, that you should buy now. You are better off buying at today’s interest rates, than waiting for the home to go down in price more and paying a higher interest rate.
Just somethings to think about while you’re up on the fence.
Please feel free to comment, email or call if you would like to discuss this more.
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For all of you in California …. Don’t forget tomorrow is the day that it becomes law that you must use a hands-free device with your mobile phone while driving.
JT Village Realty
Mobile: 760.898.4188
Office: 760.366.8642
Fax: 760.366.0111
Email: dave@jtvillagerealty.com
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