It's Time to Get OFF the Fence! |
Picture by: Dan Barak |
Two very big considerations that would lead me to say it is time to buy right now.
First Time Home Buyer Credit - Lesser of $8,000 or 10% of purchase price - this amount reduces after a Modified AGI of $75,000 for a Single Return and $150,000 for Joint Returns, and is completely eliminated at $95,000 for Single Return or $170,000 for a Joint Return. Modified AGI - just add some foreign income back to the AGI. This credit is set to Expire December 01, 2009. So, you need to move quickly to ensure you don't miss out on this free money by purchasing now. |
The Federal Reserve is set to stop buying Mortgage Backed Securities on December 31, 2009. This is in a large part what has kept interest rates artificially low to this point. After the Federal Reserve stops buying the rates could head back up to the mid 6's very quickly. With typical supply and demand, as demand rises so does prices. Bonds have both a price and a yield. A bonds price and yield (rate) move in opposite directions. As the price goes up, the yield (rate) goes down. So, the Fed purchasing Mortgage Backed Securities has increased demand, thus increasing the price and because of the relationship between price and yield decreased the yield (rate). |
Example of Your Purchasing Power with a 1% increase in Rates: Rate are presently at 5.375% so let's say that you can presently qualify a house that costs $180,000, if interest rates are to jump just 1% when the Fed stops buying Mortgage Backed Securities (which is very likely) at that point with a 6.375% rate you would only be able to qualify to purchase a house that costs $161,565. If you wait the home you qualify to purchase may be smaller with an increase in rates. |
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