BLOOMFIELD, MI – With record drops in home prices (from their peaks) combined with record low interest rates, 2009 may go down in history as the best time to buy real estate in our lifetimes.
Of course, many real estate agents ALWAYS say it’s a great time to buy real estate as their income depends on selling homes. But, The Housing Affordability Index (HAI) chart here supports their claims this time. It shows that nationally, this is the best time to buy a home since 1971, when this data started being tracked. The index takes into account housing prices, mortgage rates and wage income to determine affordability for first time buyers with no home to sell.
Two challenges with that line of thinking:
1.) Wages are expected to also fall due to rising unemployment. As more and more workers are laid off, people will compete for the fewer remaining jobs, allowing employers to lower wages. Mortgage rates will also increase at some point in response to all the bailout money the government is spending. Both of these factors work against the benefits of falling housing prices. So, there’s no way to predict where the index will go in the future.
2.) Timing the bottom of the housing market is almost impossible. Did you know when the housing market peaked? None of the experts did. So, it’s safe to assume no one’s going to be able to predict the bottom of the market until AFTER it’s rebounded.
So, what should a potential home buyer do?
The best advice I can give a buyer is to make sure YOU know your budget and don’t spend every penny of savings to get into a home. Then forget about timing the market and go buy a home. Just be careful.
I’m always amazed that buyers come to me and are perfectly willing to let ME to tell them what THEY can AFFORD! Folks, you should know your budget way BETTER than me! All I, or any mortgage person, can do is tell you the MAXIMUM amount of trouble we can get you into. The industry methods of determining your maximum amount, don’t even take into account how many children you have! It’s common sense the more children you have the tighter your budget. Homebuyers should determine a maximum monthly housing payment (including property taxes & insurance) their budget can comfortably support, BEFORE talking to a mortgage person. If you feel you need help determining a solid budget, there are plenty of nonprofit organizations waiting to help you.
With the uncertain job markets, the lending industry is requiring more homebuyers to have emergency reserves to qualify for a mortgage. Again, some common sense is needed here. Buying a home and living paycheck-to-paycheck is a recipe for disaster! Unexpected things go wrong with homes all the time and cost money to fix. If you buy a foreclosed home, you buy it as-is. The greatest home inspector in the world can’t catch everything, nor should they be expected to. Likewise, the best home warranty won’t cover everything. So make sure you have some savings to fall back on if something breaks or if there’s a job layoff.
Nothing’s sadder in real estate than to see a foreclosed property get foreclosed on again.
Today’s real estate market offers great opportunities. Homebuyers need to hire the best qualified real estate agent and mortgage professional they can find, to help them minimize their chances of becoming another foreclosure statistic and instead, properly take advantage of the chance of a lifetime.