Finally there's a sprinkling of buyer confidence creeping back into the marketplace. With interest rates in the high 4's to the mid 5's, its still amazing that the housing market still seems to be sluggish. Buyers are still waiting to see if prices fall farther or if we've reached bottom.
A number of the Agents I do loans for have asked what to say when the Buyer asks " Is this a good time to buy ? Have we reached bottom yet ?" All I can rely on is the past. In the last 3 Real Estate price reductions I have been through, the market stabilized after 24 to 30months. That is to say the prices stopped dropping and became stable.
Once prices stabilized we went into a period of moderate increase. This period lased approximately 6 months only. Then the Buyers on the sidelines began to attack the inventory of homes with enthusiasm. This demand for houses put pressure on interest rates and they began to rise. At this point both home prices and interest rates were increasing.
Look at the figures: We use a $350,000.00 Purchase using FHA Financing, 3.5% Down Payment:
$ 350,000 @ 5.5% Payment including PITIMI = $2,529.97 $ 350,000 @ 6.5% Payment including PITIMI= $2,747.07 $ 350,000 @ 7.5% Payment including PITIMI= $2,973.68
Comparing all three loans above, if Buyer stays in home 10 years the savings would be $ 67,000.54 at 5.5% and $34,033.01 @ 6.5%. compared to paying the 7.5% rate.
The gross monthly income needed to qualify at 5.5% is $7,441.11 with other payments not exceeding $595.29. The gross monthly income needed to qualify at 6.5% is $8,079.64 with other payments not exceeding $646.37 The gross monthly income needed to qualify at 7.5% is $8,746.67 with other payments not exceeding $699.73
Is this a GREAT TIME TO BUY OR WHAT ???????
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