NAR says that 13,780 houses sold yesterday and 13,780 houses will sell today (based on 2011 sales figures). So….houses are selling.
Interest rates are around 4%, meaning that borrowing $100,000 for a 30 year mortgage results in a monthly payment of roughly $478/month!
We know already that it’s a “no brainer” for a renter to check into home ownership. Of course, why pay your landlord to build equity when you can build your own (and still have a place to live)?
What about the so-called “move-up” buyer? Those hard working families with young children who bought their first house back about 5-7 years ago, with 20% down? Their families have grown in these years and they really need a larger house-now!
However, if they sell their house, they will only walk away with a few thousand dollars, at best, or perhaps have to pay a few thousand dollars because so much of their equity has eroded in this market. Where will the new 20% down payment come from?
Do not rule out a move! Speak to a lender right away. Loans are still being made with 3% and 5% down payments. See if that is possible. See if family members can contribute. Why? How about if you just wait for the market to get better?
There are a number of reasons why moving now is worthwhile. In the interest of keeping this blog short, I only want to mention cost. Your cost of a new home is the interest rate. They are the lowest they’ve been over the last 70 years or so.
Your realtor can show you examples of this and also give you other reasons why an attempt at a move today is a good idea.
The wild card in this market is the empty-nester. We realtors have many customers in this boat. They own large houses in the suburbs; they have lots of equity in those houses; perhaps even no mortgage. Most of the homes were built in the 80’s and 90’s during the “suburban sprawl era”. (Many of these houses have more oak wood on the inside than oak trees in the yard, much to the dismay of potential buyers)
They want to move into the city, into a condo, and enjoy all that the city has to offer. What a wonderful idea! They don’t care about interest rates at all because they will pay cash for their new condo. They don’t care if loan parameters change and 20% down is required on every house purchase; in fact, they like that idea a lot. We hear their song every day, “I will not give my house away…..”
So, okay, they’re waiting for the market to get better, too. Sometimes, we forget the most simple of concepts. If I, as a realtor, know a least 5 empty-nester customers who are waiting for the market to get better in order to sell, I can promise you that the other couple of thousand realtors in the state know 5 or more as well.
When the market improves, it will be flooded with these homes. So supply goes up; home prices come down.
And these empty nesters don’t care about interest rates or down payment requirements because they will pay cash. However, will the buyer of their house pay cash? Most likely no. Not only will that buyer in a number of years be paying a higher interest rate, but also the entire lending industry is undergoing change. Ask your realtor about QRM. Ask your realtor what the current ideas are about changes to Fannie Mae, Freddie Mac and FHA loans. In a nutshell, loans will be more difficult to come by in the future. So now we have more big, empty-nester houses on the market (supply) and we have fewer buyers who can actually afford to buy these homes (demand). Sometimes the most simple of concepts is the most important concept.
So…..”play the tape forward.” You may end up selling your house in a few years, in a better market just as you are hoping for, but for about the same price as today because other changes are coming down the pike. You may end up saying, “Gee, had we known that the market was going to get better, but that we couldn’t sell our house for more than we could back then, we would have moved sooner to enjoy our lives more.” It’s that old hind sight vision rule….
Is today’s real estate market really so bad after all?
Posted by: Lisa Rossetto, sales associate