The question of when is the right time to buy a home is perplexing. The media says prices will drop further next year and they are right, but the timing is critical. When the prices increase again you could see the market quickly change to a sellers market and now the multiple offers begin. Here are a few questions and my response for you to consider:
- Aren't we facing a wave of defaults on option arms and other mortgages made in 2005/2006 with teaser rates?
I believe foreclosures will rise in 2008, but these problems reside mainly with subprime borrowers which comprise only 9% of the market. Subprime borrowers with mortgages in foreclosure account for only 5% of that. Therefore the problem is confined to less than 1%, of borrowers.
2. Isn't this a challenging market condition time?
What is challenging isn't the market conditions, but the psychology behind these conditions. There is a huge pent -up demand which, I believe, will grow. In past years we have seen that for every 2 new jobs, one new home buyer is created. Job growth has been pretty strong, that's why the Feds again lowered the rates. Where are those new home buyers? I believe they are sitting on the fence waiting for prices to drop. Once these buyers look past the headlines, they'll see that this is actually a very good time to buy. Inventories are high, so there are lots of homes to choose from, prices are declining (slowly); and interest rates remain low. Once the buyer's psychology catches up to our real market conditions that pent - up demand will be released and, in my opinion, we will move to a sellers market.
Therefore, why not offer a price on the home you want with a reasonable discount included which is based upon expected price reductions and move the pressure to the seller. You may not win the deal and it may take more offers from you, but there are lots of homes to choose from and you can get a good deal!
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