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.