Home Buyers Are Buying!
Good news! Business is picking up! Calls for new mortgages, not refinances, are on the rise. The best news is that many first time buyers are back in the market. These buyers seemed to be sitting on the sidelines waiting and watching. Rates are low and homes are affordable, two great reasons to get in the game.
Why Are First Time Buyers So Important?
First time buyers are the key to a housing recovery. Here's why: If I want to buy a 1,000,000 home, chances are, I have to sell a current home. Say my current home is worth $600,000, someone buying my home probably has a home to sell. Say their home is worth $400,000, their buyer probably has a home worth $250,000 to sell. Many first time buyers can afford a $250,000 home. So, that first time home buyer purchasing a home for $250,000 is the key to this chain! Thanks to them, I can buy my $1,000,000 home.
Existing home sales are also the key to new construction home sales. Sometimes this chain starts, or ends if you prefer, with a newly constructed home. So although many first time buyers are not buying new construction, they are the catalyst to new construction sales.
Should I Really Buy Now?
Why not buy now? Don't you love when I answer a question with a question! Will home prices continue to go down? Probably. Will rates get lower? Maybe. So do you wait for the opportune time when the market is at the lowest and the rates are at the lowest? Again a question, do you know when that will be? Can you predict the bottom? I've been doing this for 18 years and I certainly can't predict when rates will be at their absolute lowest! You ever buy a stock or mutual fund that lost value right after you bought it? Has that same stock or fund then rebounded and made money for you? Maybe the same thing will happen with a home.
Over the past five years, the most basic and fundamental use of a home has been forgotten. A home is a place to settle down and call your own. Maybe raise a family. Create memories. Have a shelter that is yours. Instead, we've been looking at our home as a "piggy"bank, an investment. Instead of asking ourselves, "I wonder how much my home has appreciated?" We should be asking, "How great has it been owning a place of my own?"
Don't misunderstand me, there are plenty of financial reasons to own a home. Tax benefits are huge. Building equity for if and when you eventually sell. The security of maybe one day owning your own place free and clear. But are these really the reasons to own a home?
Say after all this, I haven't convinced you that now is a good time to go out and buy your first home. Let's say you think 2 years from now will be a better time. Maybe you hear that the market will rebound in 2010 and you want to get the best deal possible. So you rent for 2 more years and you pay your landlord 24 more rent payments. What's typical rent $800? $900? maybe over $1,000.00 depending on the area. So at $900 per month, you pay another $21,600 in rent before the time is right to buy. You spend 2 more years paying higher income taxes. With a recovery comes higher interest rates, so maybe your rate is .50% to .75% higher than today (still historically good rates that would put you in the mid 6% range). Can you see where I'm going here? Did you really time that right by waiting? Plus you spend 2 more years living under your landlord's rules. Maybe living in a noisy apartment with those neighbors who like to party on the week-end. Or maybe, you are those neighbors who like to party on the week-end and are sick and tired of the complaints.
Don't Rush Right Out
Realtors won't want me to say this, but in most cases, you don't have to make an offer right away on a home you like. As a buyer, you actually have the luxury of thinking about what's right for you and which home on the market suits your needs. This wasn't true a few years ago when homes were selling the day they went on the market. Then, people had to be decisive (when we bought the home we're in now, we actually wrote up the contract on the seller's kitchen table and submitted it the same morning we saw the property, which was the day after Thanksgiving!). Now, you can be a little more choosy. In other words, it's a great time to be a buyer!
Do your homework. Get pre-approved. There are still many areas that have stable housing prices and many other areas that have already seen large declines. I spoke to a Realtor friend this morning. He told me of a house that was originally listed for $449,000 last June. This week-end the seller made another price reduction. It's now listed for $339,000! How much lower do you think it will go? Does this kind of look like a bargain to you? Maybe the time is right to buy that house?
Stop renting and get in the game!
Let me know your thoughts on this.
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