Banks are lending money to creditworthy buyers. They are also only requiring 5% down for a conventional loan and 3.5% down for an FHA loan. The news media is either giving buyers the impression or actually telling the public that banks are not lending or that they are requiring 20% down. This is just not true. What is true is that they have tightened their lending practices that were once out of control. They have also eliminated the 80/20 loan that was designed to cover the private mortgage insurance. Now, in order to avoid paying this monthly insurance, you need to put down 20%. This is where the confusion may lie.
Before the downturn, a buyer could purchase a house without even having a job, as long as they had good credit! That is not the case anymore. Those days are gone. Banks are now scrutinizing each and every loan to make sure they don’t make a mistake by taking on a buyer who cannot pay. You may have to provide more paperwork than ever before to the lender but they are still lending!
Thursday, February 5, 2009
Wednesday, February 4, 2009
The Problem with the News Media Reporting on the State of the Market
The problem I see in our marketplace in the Triangle area is that more times than not, the news media is reporting on the national, rather than local, real estate news. People in our area may get the impression that we are in the same boat as the rest of the country and that our prices are going to drop to the levels of California or Florida. Many are sitting on the sidelines waiting for the bottom and will miss out on some great deals. The reason our prices will not drop like these other areas is because the Raleigh area has never been in a balloon market. Our prices were never over inflated. When other markets had crazy out of control prices, our appreciation stayed fairly consistent over a long period of time.
The reason our area has been affected is because there is such a high volume of people from all over the country that cannot sell their homes and move to North Carolina as they intended. This has caused the Raleigh area to temporarily lose buyers and have higher inventory levels. We were the last to come to this down marketplace and I understand by our local economists that they predict we will be the first to come out of it.
In the Wall Street Journal on Tuesday, January 27th, the article, “Price Cuts Spur Homes Sales” said that U.S. Home sales registered their biggest monthly jump in nearly seven years in December, a rise of 6.5% from November. It also showed a map of the U.S. and the percentage decrease in home prices over the last year. The Raleigh area only registered a mere -2.5% drop in prices while other major markets such as Las Vegas (-26.8%), Miami (-23.5%), Phoenix (-22.3%) and Los Angeles (-21%) were substantially down. As you can see, the Raleigh area is considered one of the best markets in the country and has been the least affected in the down market next to Dallas (-1.8%). That says a lot about our area!
With this information, it is clear why the news media should not talk about the real estate market as a whole, implying that all of the markets in the country are the same. Our market is clearly different than these other markets in this recession. I understand that once home buyers in other parts of the country are able to sell their homes and relocate, they are picking areas with strong rebound potential.
The Raleigh/Durham area is being eyed by people who want a better quality of life, affordable housing and lower taxes. As soon as they sell their homes, they say they are off to North Carolina! In 2008 we were named as the #1 Best Place to Live in the US by MSNBC!
The reason our area has been affected is because there is such a high volume of people from all over the country that cannot sell their homes and move to North Carolina as they intended. This has caused the Raleigh area to temporarily lose buyers and have higher inventory levels. We were the last to come to this down marketplace and I understand by our local economists that they predict we will be the first to come out of it.
In the Wall Street Journal on Tuesday, January 27th, the article, “Price Cuts Spur Homes Sales” said that U.S. Home sales registered their biggest monthly jump in nearly seven years in December, a rise of 6.5% from November. It also showed a map of the U.S. and the percentage decrease in home prices over the last year. The Raleigh area only registered a mere -2.5% drop in prices while other major markets such as Las Vegas (-26.8%), Miami (-23.5%), Phoenix (-22.3%) and Los Angeles (-21%) were substantially down. As you can see, the Raleigh area is considered one of the best markets in the country and has been the least affected in the down market next to Dallas (-1.8%). That says a lot about our area!
With this information, it is clear why the news media should not talk about the real estate market as a whole, implying that all of the markets in the country are the same. Our market is clearly different than these other markets in this recession. I understand that once home buyers in other parts of the country are able to sell their homes and relocate, they are picking areas with strong rebound potential.
The Raleigh/Durham area is being eyed by people who want a better quality of life, affordable housing and lower taxes. As soon as they sell their homes, they say they are off to North Carolina! In 2008 we were named as the #1 Best Place to Live in the US by MSNBC!
Tuesday, February 3, 2009
The Risks of Timing the Market
Let’s first start out by asking, what does a buyer’s market really mean? Being in buyer’s market means very good news for you if you are purchasing a home. It means that this is the best time to buy a home because houses are priced very well since inventory levels are higher than they should be against the number of buyers in the marketplace. Buyers have the negotiating upper hand.
The big irony is that a buyer’s market is the absolute best time to buy a home but buyers are afraid of paying too much and wait for the proverbial bottom to hit. However, in a seller’s market we are buying when prices are over inflated and homes are top dollar. A buyer cannot perfectly time the market or its bottom. No one can. You can look at indicators that will tell you the direction in which the market is going or how far it has fallen, but the only way of knowing that the market has bottomed or peaked is after it has started back up or down. If you are consistently following the market and paying attention, you can buy at the right time and for a good price and most likely, do well over time. People are wise to purchase in a buyer’s market. They know they cannot predict the absolute bottom, but they can see when a market has fallen considerably. They are not trying to predict the bottom but are trying to buy smart. They know it is a matter of planning and not luck. You should ask the question “Has the market dropped enough now to make a good buying decision?”
Buy now or wait?
Buyers who choose to wait “until the prices go down even further” are also gambling that interest rates will hold steady or drop. Even a 10% drop in home prices is immediately nullified by a mere 1% point increase in interest rates on a 30 year mortgage.
Interest rates are currently at an all time low, under 5% and there is talk of it going to 4.5% for a 30 year fixed loan. Therefore, you would have the advantage of lower interest rates, as well as competitive home prices.
The big irony is that a buyer’s market is the absolute best time to buy a home but buyers are afraid of paying too much and wait for the proverbial bottom to hit. However, in a seller’s market we are buying when prices are over inflated and homes are top dollar. A buyer cannot perfectly time the market or its bottom. No one can. You can look at indicators that will tell you the direction in which the market is going or how far it has fallen, but the only way of knowing that the market has bottomed or peaked is after it has started back up or down. If you are consistently following the market and paying attention, you can buy at the right time and for a good price and most likely, do well over time. People are wise to purchase in a buyer’s market. They know they cannot predict the absolute bottom, but they can see when a market has fallen considerably. They are not trying to predict the bottom but are trying to buy smart. They know it is a matter of planning and not luck. You should ask the question “Has the market dropped enough now to make a good buying decision?”
Buy now or wait?
Buyers who choose to wait “until the prices go down even further” are also gambling that interest rates will hold steady or drop. Even a 10% drop in home prices is immediately nullified by a mere 1% point increase in interest rates on a 30 year mortgage.
Interest rates are currently at an all time low, under 5% and there is talk of it going to 4.5% for a 30 year fixed loan. Therefore, you would have the advantage of lower interest rates, as well as competitive home prices.
Subscribe to:
Posts (Atom)
Posts
