Real Estate Information Archive

“It’s not far, if you know the way.” What this expression implies is that you could have a long way to go if you don’t know where you’re going or how to get there. Just like reading a map, there are some definite steps that will improve your success in buying a home in today’s market.

• Know your credit score – the best mortgage rates are available to borrowers with the highest scores. Unless you know what your credit score is at all three major credit bureaus, you don’t really know what rate you’ll have to pay.
• Clean up your credit – it is estimated that about 90% of credit reports have errors. Some are not serious but others could affect a borrower from getting the loan they want. It is your responsibility to know what is on your different reports and correct them if possible. You’re entitled to a free copy of your credit report each year from Experian, Trans Union and Equifax.
• Get pre-approved – Taking the time to make a loan application with a qualified lender even before you start looking at homes will provide peace of mind, make sure that you are looking at the “right” homes and may help you negotiate the best price on the home you select.
• Do your homework – when you find the home that meets your needs and desires, get the home inspected and research the tax assessments, school ratings, crime activity, possible zoning changes and comparable sales in the area.

Call for a recommendation of a trusted mortgage professional and an inspector.

What Can You Expect?

The two most frequently quoted constants in life are death and taxes.  Two more things would-be homeowners can expect in the near future are increases in mortgage rates and housing prices.

Interest rates have been kept artificially low for several years by the Federal Reserve in an effort to strengthen the economy. Policy is shifting to allow them to seek their own natural level and that will surely result in higher mortgage rates.  Rates on 30 year fixed mortgages are up over 1% from January, 2013.

Foreclosure activity is down, new home starts are up and prices have been increasing in most markets for two years.  Most experts agree that the cost of housing is going up.

If the price were to go up by 2% and the mortgage rate by 1% while a buyer is “sitting on the fence” making a decision, the payment would go up by almost $175.00 each and every month for the term of the mortgage.  Even if a person can afford to make the higher payments, what could they have done with that extra $175.00 a month?  Buy furniture?  Car payment?  Principal reduction?  Retirement contribution?  Save for a rainy day?

Click here to determine what the cost of waiting to buy will be using your price home.

It Can't Hurt to Wait, Can It?

It’s been said that more money has been lost due to indecision than was ever lost because of a bad decision. Regardless of whether you agree with the statement, delaying the decision to buy in today’s market is going to cost the buyer more. 

Home prices have gone up considerably in almost every market in the country in the past year and while inventories are beginning to grow, prices are expected to continue to rise. Mortgage rates jumped 1% from the beginning of May to now. They could easily reach 5% by the end of the year and continue to rise in 2014.

Many of the financial experts in the country believe that the economy will not be strong until rates are in the 7% area.

The two components that move the cost of housing are price and mortgage rates. Escalation of either one will have an affect but when both are going up simultaneously, it is dramatic. It can literally eliminate buyers who could have purchased earlier.

The following example shows what would happen to the payments on a $200,000 home if the price were to go up 3% at the same time that the mortgage rates went up 1%. Not only would the payments go up by $150.81 per month, the price of the home would be $6,000 more. Even though the down payment may not change much, the new owner would have to borrow more money. By not acting, it is costing them more in price and payment. The loss of the appreciation would have been equity had they purchased prior to the rise in price.

Check out the Cost of Waiting to Buy to see what the effect will be using your own projections.

Low Inventories Indicate a Trend

Low inventory is a relative term depending on how you're comparing it.  Would the comparison be to total number of homes on the market last year, homes in a certain price range or homes in a certain area?  In some situations, it's a combination of all of those things.

In any given market, inventories will fluctuate based on area and price range.  The National Association of REALTORS® considers a balanced market to be six months' supply of homes.  If it takes longer than six months to sell, it is thought to be a buyer's market and less than six months, a seller's market.  Most buyers and sellers probably feel inventory equilibrium is more like three month's supply of homes.

Inventory has a direct impact on price.  During the housing bubble, demand decreased, supply ballooned to four million houses and prices dropped dramatically.  Increased inventories due to foreclosures, bank' revised lending practices and builder's lack of new housing starts each contributed to the dramatically lower prices.

As the market has recovered, economic conditions have improved, banks have loosened their requirements, interest rates have remained low, foreclosures have slowed and gradually, the inventory has been reduced to approximately two million houses.  When demand is constant but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.

Based on the low mortgage rates that have been inching up each week in 2013 and an improving consumer confidence level, most markets are experiencing some increase in demand.  With inventory decreasing, buyers in the marketplace can see that prices are increasing.

Just as signs of spring can be seen to be just around the corner, it should be recognized what direction prices will be moving.  Hindsight is 20/20 but we can't purchase or sell in the past.  We need to make decisions today on what we think will happen in the future.

If you're curious to know what inventory conditions are for your specific market, send me an email with the price range and area and I'll send you a report.  John@JohnRiggins.com

I Want a Bigger/Nicer Home but...

There are homeowners that would like to have a larger/nicer home but are patiently waiting for the market to improve. A frequently heard objection is that they can't sell their home for what it is currently worth.

Buying up in a down market is actually advantageous because while you might get less for the home you're selling, you're also getting the larger home for less. For instance, if you had to sell a $200,000 home for a 10% discount, you might feel that you left $20,000 on the table. However, buying a $300,000 for the same 10% discount would put you $10,000 ahead on the sale and purchase.

The other obvious matter is that when the mortgage rates increase while you're waiting for the market to improve, it dramatically increases your cost of housing with higher payments. The cost of housing is affected by price and mortgage rates.

To accurately evaluate your current options, you need facts and assessment tools that will provide you the information to make an informed decision.