Joshua Zumbrun of Forbes Magazine wrote an article explaining the 8 reasons to be wary of housing. http://www.forbes.com/2009/09/28/housing-prices-mortgages-business-washington-housing.html This is just typical of the doom and gloom crowd. As a Long Island mortgage originator, I refuse to believe this nonsense. I will go through his 8 arguments to show why this is actually a good time to buy a home.
- The Tax credit is leaving First of all, there are proposals in Congress to keep or even increase the tax credit. Secondly, this ignores the fact that the Federal government has just pumped in 35 Billion dollars to state programs for affordable housing.
- The Fed is not buying Mortgage Backed Securities Yes, the fed is winding down its purchases of Mortgage back securities. However, private investors are buying them and interest rates are still at historically low levels.
- Tougher Underwriting Guidelines The days are gone that if you had a social security number and a pulse, you qualified for a mortgage (thank god). However, there are still plenty of programs, including FHA and VA where a borrower can put only 3.5% down (FHA) or no money down (VA). In addition some of these programs have FICO scores as low as 580.
- Prices Are Still High What planet is this guy on? In most areas of the country, prices are dropping and will continue to drop. In addition, with home prices going down and interest rates are dropping, it is now cheaper to own a home rather than rent. That is the bottom line.
- Damaged Psychology This is the best time to buy. If pessimism is setting in, that tends to drive down prices.
- End of Summer Well golly gee whiz. I did not know no one buys or sells a house except during the summertime. If demand is down now, what does that mean? It means prices drop. It is a good time to buy.
- Flood of Foreclosures This is the flip side of the supply/demand equation. If there is a flood of foreclosures that means supply is up. An increase is supply means home prices will drop. This makes it a good time to buy.
- Shadow Inventory What this refers to is home owners who want to sell their home but will not put it on the market because their home value has gone down or they owe more on their home than it is worth. All I can say is that everyone has to live somewhere. Just because current market conditions dictate that some sellers do not put their home on the market does not mean no one is selling. There are plenty of good opportunities to buy homes at great prices.
As a Long Island mortgage banker, I have heard every excuse in the book why this or that is bad. If we bought into this, no houses will be sold. Housing prices are down. This is a good thing. It is a natural correction to the housing bubble we have experienced. People are still qualifying for mortgages and buyers and sellers are getting together. In this environment, it requires persistence, patience and effort.
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