I can say with a great deal of confidence that now is a good time to buy real estate in the New Haven area. There are several factors that contribute to my reasoning on this matter, but the general consensus is in, “If you have been waiting to buy real estate until the market went down, now is the time to start shopping.” Interest rates are still very low and the mortgage market has been under a lot of pressure to create new ways to lend money. That means that there is money out there for you, and the banks and mortgage brokerages are working hard with state and federal law makers to find new ways to get it to you. Home prices are down, and while this is not such good news if you already own real estate in the New Haven area, if you have been biding your time waiting for those stories of multiple offers and bidding wars to fade from your memory, then that time has surely come. And lastly, sellers are finally getting the picture, which means that they are coming to the table ready to negotiate with realistic sense for what it will take to reach an agreement.
Reason number one to buy real estate in the New Haven area now is that the interest rates are still incredibly low.
This is especially true when compared to the rates of the past real estate declines, the most memorable of which was in the mid seventies when rates went as high as 16%-18%! I still get a little sick to my stomach when I think about paying that much interest over a thirty year period.
(For example, on a $100,000 mortgage with a rate of 16% the actual cost to borrow the money, if you add up all the interest paid over thirty years, would be $384,113. So you could have bought that same house almost 4 times over buy then.)
Not only are rates low, but the FED has made it clear (keep in mind that when we talk about clear for the FED we might as well be saying that skim milk is clear) that rates will not be going up soon. For more information and to see their most recent statement about the econmy click FED Press Realese August 5th, 2008. In addition to the currently low rates, many of the major banking institutions have been crying for more leeway to loan money. Fortunately for us, and due to their hefty budget for lobbying, they were able to influence policy makers. Much of this new legislation has already come into effect, with more on the way. Also, during the past year there were many policies punishing borrowers trying to get loans in markets that were identified as declining. Most of those policies have also been rescinded by now, or are scheduled to be rolled back in the very near future. The Office of Housing and Urban Development (HUD for short) which has direct influence over the Federal Housing Administration (FHA) has also been changing their guide lines to allow applicants with higher incomes, and properties with higher purchase prices (up $400,000 in some areas of New Haven). These FHA loans have largely replaced the 100% financing options that have all but disappeared since the “national mortgage crisis” began. Primarily because they offer buyers the option to put as little down as 3%, and are more forgiving of past credit mistakes.
The second reason why now is a good time to buy real estate in the New Haven area is the home prices have fallen over the last year.
For example, single family homes in the city of New Haven sold at a median price of $198,960 from January to June of 2008. This represents an 11.8% decline in the median sales price of a single family home during the same period in 2007. These statistics come from The Commercial Record, which is reliable to an extent. Being an appraiser I have an affinity to statistics but I also know that they are not 100% reliable. I generally like to look at more than I set of numbers, and then make some educated statements about certain situations in which the statistics would not be reliable. So here is another market stat for you to ponder. According to the CT Coop MLS (the multiple listing system that all of Connecticut uses except for Fairfield County) the average sales price for all properties in New Haven County from January 1, 2008 to August 8, 2008 was $311,567. That represents an 8.3% decline from the same period in 2007. For more real estate and other interesting statistics about New Haven go to Trulia's New Haven page. So there are obviously some differences in these numbers and what they represent. I could further break these down for you, but that’s not what you’re here for. Instead, I think it’s safe to say that in general real estate in the New Haven area has declined in value approximately 10% this year to date. This is not to say that some properties are loosing more or less value, or to say that some properties values haven’t gone down at all. What this does say, and what I really want to focus on is that if you were a buyer last year who held off for whatever reason, that home that was just beyond what you could afford, is more than likely within your price range now.
The third, and final, reason why now is a good time to buy real estate in the New Haven Area is that most sellers are aware that the current market atmosphere is one that favors buyers.
It must be noted that this is a very different atmosphere than the real estate market of a few years ago. Buying a house back in 2004 or 2005 was almost like playing bingo, or lotto even, because it was hit or miss when it came to getting an offer accepted. I can clearly remember having casual conversations with buyers, all of whom were talking about putting in offer after offer on the houses that they wanted, only to be beaten by a higher bidder. Their stories inevitably ended with a frantic buyer waiting to pounce on any new listing that they even remotely liked with an offer at or even above the asking price. But now the tables have turned, and I’m sure many of you who have been waiting for this change are doing your victory celebrations, happy dances, fist pumps, whatever. (Go ahead, after all you were the smart ones who waited for this moment, enjoy it.) And if you don't believe me check out this Q & A session at Trulia. Now sellers, and their agents (the fact is that the agents have been steering the sellers in this direction for some time, but many are reluctant to hear that their home is no longer going to command the price they think it should), are ready and willing to entertain almost any reasonable offer. And at times, depending on the circumstances, they may be willing to negotiate a contract with very favorable terms for the buyer so long as some key sticking points are met. In other words, sellers are ready to play ball. If you have a real power negotiator working for you can even find a few sellers who are desperate to get rid of their home to anyone with a pulse and mortgage commitment letter.
Buyers: If you're ready to start your dream home search contact me and I can guide you to the perfect home in the New Haven Area.
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