Affordability and the American Dream

By
Education & Training with Blue GMAC Realty

So now that it's a buyers market, how come the buyers aren't buying?  Are they waiting for the housing markets to hit "the bottom" or are they just plain scared about making a commitment or is it a matter of affordability? Do buyers know that their buying power may never be greater then it is right now or are they waiting for a "sigh from above" before purchasing a home? Or, are we as REALTORS, not sending the right message to consumers. Or, have we lead them to believe that foreclosures and REOs are "Deals" and they should wait for a good opportunitiy in this areana.

Buyers are thinking that prices still have some adjustment left in them. In most cases, they are correct. And because they think this they tend to postpone their purchases until some time in the future. However, the affordability factor may not be there when they decide to buy. Let's take a home with a selling price of $300,000. If buyers are putting a 20% down payment and a LTV of 80%, a fixed rate, 30 year loan at 5.35% will cost them roughly $1340. Per month. That's Principal and Interest only.

Now, let's take the same scenario at 6.35%. The difference will be $55,080 over the life of the loan. This means that our sample home must depreciate another 17% in order to make up the difference. And that's assuming that mortgage markets are able to stay around that 6% rate. The difference will only be greater if money becomes too tight due to consumer spending habits. And I believe that this may be the case if credit becomes even tighter in the near future.

I believe that consumers need to know that affordability may never be better and that NOW is the time to buy.

Comments (6)

Nicole "Nicky" Sensale
Brooksville, FL
Florida Equestrian Properties
great post!
Jan 30, 2008 06:07 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Hey Tim!

Nice post. You know that some folks just wait to long. This market is going to change big and it is going to change fast. Hang in there. The timing is now and we are all about to be very, very busy.

Happy Selling!

Tony Grego - Indiana Mortgage Broker 

 

Jan 30, 2008 06:12 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Hey Tim!

Nice post. You know that some folks just wait to long. This market is going to change big and it is going to change fast. Hang in there. The timing is now and we are all about to be very, very busy.

Happy Selling!

Tony Grego - Indiana Mortgage Broker 

 

Jan 30, 2008 06:12 AM
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

Excellent post!  I think that it's a combination of things that are keeping the buyers out of the market.  The biggest of which are;

1)  People don't want to buy a home that may be worth less next year than it is now when they buy it.

2)  People are feeling the pressure of high oil prices and increased living expenses.

3)  People are afraid that the economy is heading in or already in a recession.

A confused mind says, "No!" and that's what people are doing.

 

Bob Mitchell

ValueList Real Estate Services, Inc. 

 

Jan 30, 2008 06:27 AM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC
I think with the drop by Fed today, it will bring out the buyers. I have seen an increase in the last 2 weeks. Hope it stays that way.
Jan 30, 2008 06:27 AM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in the year 2017!

Feb 07, 2017 07:29 PM