Impact of Rising Rates When Buying a Home

As I have been saying for months buyers should act while the rates are low and not just wait to see if home prices will continue to drop. They may loose the home they want and
pay more for a home due to the rise in interest rates. A recent article in Keeping Current Matters emphsizes this point.



Impact of Rising Rates When Buying a Home: "No one knows exactly what will happen as we move forward. The only thing we know for sure is that rising rates have a tremendous impact on a buyer’s payment. There are home buyers standing on the sidelines waiting for the prices of real estate to bottom out. If you are one of these buyers, be careful. You should be as concerned about the monthly COST as much as you are concerned about the PRICE"


Watch the interest rates and take action before they affect the "cost" of buying your next home.

Hope everyone has been enjoying the holidays inspite of the unusual weather.


Jack and Julia

Buy now and sell now!!

These times are very confusing for consumers but it helps to have
information from various experts in the real estate industry all summarized
for you here in our blog.
What are the experts saying for November? To quote John Paulson
on 9/27/10, the fund manager who shorted the housing market way
before it went down ,is now saying " If you don't own a home buy one,
if you own a home buy another one, if you own two homes buy a third,
and lend your relatives the money to buy a home also" He is the person
everyone is looking to for housing market advice. This comment sums it up.
Interest rates are predicted to go up over the next 7 quarters of at least one
full percent. So even if the prices of homes continue to go down in the next 12 months
the cost of the home can rise due to increases in interest rates. We are already
seeing an increase in the purchase of luxury homes as savy buyers understand
that the "Cost" of homes are at an historic low.

So invest in an assest that is tangible and at an all time low cost. (What do we
say about stocks, buy low and sell high!

After reviewing reports from various indexes and news articles it is clear to Jack and me that in order to get a home sold the seller needs to price his home at a compelling price. This would be a price that compels the buyer to purchase the home because he feels that if he doesn't
someone else will at that price. (The National Association of Realtors posts its report of PendingSales each month and Economists predicted that pending sales would go down by 14%, but actually pending sales declined by 30%!)

Individual home prices are decreasing in almost every market and as we go forward home
values will continue to depreciate. The experts expect to see another 5 to 10% (worse
in some markets). Of course home values are affected by supply and demand and demand
was affected by the home buyers tax credit, but that has gone away and at best demand
has remained stable while supply continues to increase. And coupled with increased foreclosures nationally, home values will continue to loose value and are at their highest right
now. I wish we could be more optimistic. The other side of the coin is that buyers have a
great opportunity, if they realize it.

Buyers are confused about when to buy. Interest rates are at an all time low, but are predicted to rise by December after the investment markets in Europe and Asia settle. So faced with changes in the future that could bring higher interest rates, stricter guidelines for lenders, and more emphasis on credit scores, buyers should act now if they are ready.


To summarize the S & P Case Schiller report: "inventory data and foreclosure activity have notshown any signs of improvement" The Core Logic Index: "the second half of the year we expect price growth to soften and possibly decline" The RPX index: "lower demand and greater supply will lead to new lows in prices"

Again, what this means to a home owner currentlly selling his home is that right now is the best time to sell and waiting for a higher offer or keeping your home at a higher price is not going to attract a buyer. Your home is worth more now than it will be in the next 6 months.

You need to hire a Realtor who will educate you on the market and help you make the right
decisions. That is why Jack and I stay informed and follow what the experts are saying.
We hope you the consumer will remember to reward the Realtor who tells you what you
need to hear and know and not just what you want to hear so that you can make the right decisions for you and your family.

Great time to buy! That is what we are hearing. The main reason buyers should pay attention
is the interest rates which fell to the lowest level in generations. Bankrate.com surveys lenders
and has stated that the 30 year fixed rate fell 11 basis points to 4.96 percent (large lenders surveyed).
In 25 years of monoriting rates this is the lowest we have seen!

Experts feel that the interest rate is the lowest since 1956! The crisis in Greece has caused
money to become cheaper in the US. Nothing lasts forever so I hope buyers understand
what a gift this is.

This is the time to lock in a loan on the home you have been watching.

Give Jack and I a call to help you locate the best property at the best price. We can also
recommend lenders that offer very good rates. We have been working with lenders
for over 25 years.

The Fed has already announced that they are exiting the mortgage market as scheduled (March 31, 2010) and there doesn't seem to be any interest to again extend the tax credit. However, we are seeing strong activity in our market and even the revival of multiple offers on individual properties. I think buyers are finally realizing that this is a good time to buy while the interest
rates are down.

Also, the Fed has announced that they will be definitely exiting their plan to purchase mortgage-backed-securities. That plan has helped to keep interest rates on a 30 year fixed rate mortgage down by two full percentage points since its begining in October, 2008. The experts believe interest rates will increase immediately once the Fed backs away. Some lenders believe rates could return to the seven percent level that existed before the Fed involvement. What can that mean to buyers? You can see that even if prices continue to go down, the change in interest rates could dramatically increase monthly costs. On a $200,000 loan an interest rate increase
from 5% to 6% reduces the amount you could borrow and keep your payment the same to
$180,000. That is a 10% decrease in the amount you could borrow with the monthly payment you would be seeking; with only a 1% rise in interest rates.

So I hope buyers do not make the mistake of waiting too long to buy.

As a Realtor reviewing the statistics and the Real Estate news I feel the pressure to tell my clients to buy now before rates go up, I wonder if the buyers are feeling it too.

We are begining a new year and I am sure we will see changes as we go along. Nothing stays
the same for very long. I did read an interesting article recently warning "buyers of new construction" that builders are making changes to new construction that could be perceived as
cutting corners, yes they are passing codes, but not giving as many extras or as much quality
which may be a problem down the road. This new trend gives me concern. I do feel that the
real value for buyers right now is found in the resale market, foreclosures and short sales.

I hate to see buyers postponing decisions to buy believing that the low interest rates will be there waiting for them at the time they do decide to buy. With the need to finance our growing debt we will most likely see rates rise ; they always rise with demand in the summer anyway. I would advise with the $8000 first time buyer tax credit and the expanded $6500 buyer tax credit for buyers who have lived 5 out of the last 8 years in their home prior to buying which ends April 30th, (closing by June 30) now is the time to get your decision made.

Sellers who wish to get their home sold need to get their home on the market and do all that their Realtor suggests to compete agressively in the market (stay with or below your direct competition). Often if you give up some on the selling side you are recoperating the loss on the buying side and hopefully even more.

I am excited about the new year and ready to take on its challenges. Licensed since 1984 , I have seen many different markets and what it takes to help your clients adapt to them.

Oh, we are now exploring the use of video tours instead of virtual tours, which gives the buyers
a better feel for a property. Change is here.