In my previous post, I stated, not buying now is a bad decision and I wanted to take a moment and explain why.
Sure, many full time real estate agents are in tune with the market, and know alot about the areas that they service, but not all real estate agents work as a mortgage broker, or have access to mortgage brokers on a regular basis. We have mortgage brokers in our office, that are available 7 days a week if needed, and lets not forget to mention.... I am one as is the broker of Perrone Realty as well!
But know this. Many lenders are tightening their belts on what deals they will do and many are getting rid of what the lenders consider to be high risk loans. Arms are slowly going away from main stream, which is not entirely a bad thing, but along with them are loans meant to assist many marginal buyers the opportunity of home ownership. First time home buyers are often younger persons (25 y/o to 40 y/o), who have ample opportunity to increase their income over the next few years, and what might be a little bit of a stretch today, in 1 or 2 years will not. That is, if they lock in at todays rates!
Those people who elect to wait, be it because they don't want to stretch themselves to thin, or maybe they are waiting on prices to continue to fall.... these people are the onese making a bad decision. Mostly because of interest rate risk. While I do not believe prices will continue to fall, I do believe rates will slowly continue to rise. At least to an average rate of 7% within the next 9 months. But that is just my speculation. (and I admit it is just my best guess) And the market is the only one to determine this. (remember buyers and sellers determine the market, not me, or any other real estate professional)
So while a buyer may be waiting for the price to drop another 5 or $10,000 on a certain home, if the interest rates continue to rise, the money the buyer is attempting to save now will be eaten up in just a few years at a higher rate actually costing the buyer more in the long run. So I suggest grabbing the lower rate and benefit over the life of the loan, rather than attempting to save a few dollars today on the sale price and paying the bank 2 or 3 times more that why you had initially tried to save.
If you need a free consulation, to work the numbers specific to your situation, give us a call. We will give you honest answers, but as I always say.... be careful what you ask, you may not like the answer.
Brady Pevehouse
Perrone Realty / LynkMortgage
www.GoPerrone.com
www.LynkMortgage.com
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As a Realtor® as well as a Mortgage Broker I strive to ensure the client is educated and taken care of through the entire buying and selling process http://www.SellItInCentralFlorida
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Hello Brady, I have read through many of your blogs to date. I do disagree on this post that the rates will rise. Before the financial crisis sort of came to a head, I had predicted rates in the high six's by early fall and then dropping near the mid 6 range by winter in to early spring.
I have updated my forecast to believe that we will fall to the low six's by winter. Something in the range of 6.15 to 6.25. (Hoping for a brief dip into the very high 5's for a few weeks). I think there will 2 Fed rate cuts this year, each about .25 That will help marginally ( but help is the key word) to kick start the buying market by very early spring. Prices have settled down and are still tending only marginally lower but in some areas actually seeing a 2 to 3 % annual appreciation. Our higher end market in California, over the million and up to 3 to 5 million mark has actually increased in value ,in the range of 5 to 7% over last year. It is only the lower ends of the market here that needs help getting started again. The entry level Buyers ( in our case in the 300 to 400K category) will, once they start buying again, cause the lower ends to move up. Each level having a beneficial effect on the next level up. By summer and fall 2008, we will see a market that has returned to about 50% of what has been lost by inactivity.
No one ever knows who will be correct in this guesstimations, so you will have to be the judge of that when the times comes to see if this prognosis is correct. I have been quite lucky in that most of my forecasting has been spot on for a number of years. Hopefully it continues.
Wishing you a Good Market!
Thanks, Mr. Johnson Glad to know my typing has not been for nothing......
The post originally dated 7/31 was prior to the stock market dip and recovery as well as the federal funds rate drop a little over a week ago. While the funds dropped borrowing cost to lenders, lenders did not drop that to clients, it was done solely to soften the blow of bad debt being absorbed by lenders. (CountryWide)
While my assessment of the market has lightened a little in regards to anticipated lending practices, I only hope I am proven wrong. I anticipate rates now to remain the same through the end of the year, but that is my opinion based on my research and response from the lenders current actions.
This is why I advise clients to stop speculating, that is what got us into this position in the first place. If the home is right, if the payments are managable, then move forward with the transaction. I am not discounting what you have said, and honesty believe maybe you are in tune with this subject just a little more than I, as you have a proven track record, I do not......... as stated before I hope I am wrong, but interest rate risk is the same as opportunity cost.
What is the potential loss if you do wait around? The property will be sold to someone else? The mortgage rate could go up? The property could drop another $5000 and rates could go up a half point or do the complete inverse..........
Just like mutual funds........ real estate must return to a long term investment vehicle! Not based on speculation and that was the jist of my position!
Thank you for the very educated response! I hope you are correct!