Don’t let fear cool your desire to buy
There’s a fear that’s circulating around the country – a fear that is manifesting itself in the form of buyer malaise; a fear that is governing the purchase of stocks, automobiles, restaurant dinners, vacations and homes; a fear that will in the end cost potential homeowners money if they don’t get past it.
Just because the housing market is struggling isn’t a reason not to buy. In fact, it could very well be the ultimate reason to buy, especially for first time home buyers. The window of opportunity is open, especially if buying a home is something you have been thinking about and planning for a long time. Whether it’s a second home, a retirement home or a first home there are some great opportunities available, especially if you’re planning on staying put for at least five years.
In the wake of the sub-prime mortgage crisis, lenders have tightened up their qualifying criteria, a very good thing for the industry and for the housing market. But if you have a good credit score and appropriate income, there is plenty of mortgage money available at excellent rates, which may not be around much longer.
The Federal Reserve has slashed rates faster than in decades, and we haven’t seen the total impact of these rate reductions yet. By the time the economy meets the official criteria of a recession, it could already be half over, leaving home buyers wondering if they missed the market. Even if the Florida market, which has been one of the fastest to grow and one of the fastest to fall, is not at the absolute bottom, there are still very sound financial reasons to take this opportunity to buy.
As reported by Time magazine, on a $218,900 home sale with 20 percent down and a 30-year fixed mortgage at a rate of 5.5 percent, the monthly principal and interest will come to $994.31 a month. Let’s assume the same house is worth 10 percent less in a year or $197,010. Twelve months down the road, the Federal Reserve may perceive the recession is over and start to increase rates to stem inflation. If this happens and mortgage costs rise just half a point to 6 percent, the monthly payment on the home would be $994.94, almost the same as if you bought it a year earlier even though you paid less. This, of course, does not factor in the lifestyle benefit gained from living in your own home for a year, or the possible rent savings and tax write-off benefit derived.
In addition, you never know what the sellers’ state of mind will be a year from now. If prices start to level off and inventory starts to decline, sellers will be in a stronger negotiating position. Of course, if you need to sell the home you are currently living in before moving on, the logistics get more complicated. Nevertheless, taking advantage of the current market, which appears to be at or near the bottom based on the 4 percent increase in number of sales in January for our region, is what all potential buyers should consider.Trying to perfectly time any market is virtually impossible. The perfect storm of depressed prices, low interest rates and strong inventory is now. It may change by next year. “The only thing to fear is fear itself,” is just as relevant in 2008 as it was when Franklin Roosevelt said it in the 1930s. Don’t let fear dictate your future.