Low Rates, Low Prices….Still Holding Off Buying A Home?

Low Rates Low Prices Still Holding Off Buying A Home? There was a comment to the previous article earlier this week that mentioned she and her husband were planning on waiting about a year for home prices to drop even further before considering buying a home. Not a bad plan by any means considering the fact that many areas will indeed continue to drop in home prices. But it occurred to me that there may be other things one might consider before officially putting off buying a home for a year. For example, have you seen what mortgage rates are at these days? They’re absurdly low! So I thought I’d briefly discuss some things that I have been reading up on this week regarding the issue of whether to buy now or to wait.

For starters, I want to discuss home buying as opposed to refinancing because refinancing is a slightly different beast than buying a home; Mainly because it heavily involves the equity (or lack thereof) in your property. That being said, there is a different train of thought that goes with when to refinance and when to wait.  And so, without further ado……….

James Hagerty of the Wall Street Journal reported this morning that Jay Brinkman, chief economist of the Mortgage Bankers Association, said “rates on 30-year fixed rate mortgages for borrowers with strong credit scores are likely to be in the range of roughly 4.6% to 4.75% at least through the summer.” This dip in rates came after last Wednesday’s announcement by the fed that they were committed to buying an additional $750 billion in mortgage backed securities (in addition to the 500 billion already committed). So this begs the question: How long can rates possibly stay this low? Peter Thompson of Illinois Mortgage Rates and News wrote a great, in depth article on this and he goes into the three schools of thoughts on what will happen going forward:

  1. “The Fed buying will push rates steadily lower, possibly into the mid to low 4s. This is the view you hear in the media.” He goes on to say, ” This may happen, but it will take a lot more than just the Fed buying to get rates this low, and with lenders still near capacity, they are keeping more of the profit for themselves instead of passing it along to consumers.”
  2. “Rates will stay low, but closer to the range we are in now. This means rates will stay affordable longer, but may not go a lot lower.”
  3. The law of unintended consequences kicks in and instead of rates dropping, fear of inflation and the devaluation of the dollar drives rates higher than they were before. There are a lot of inflation hawks out there, and I agree that down the road we are going to have to deal with inflation. But that is in the future.”

For #1 to happen, banks would need to start cranking out loans at a ridiculous rate, which most likely isn’t going to happen. And #3 may be in the cards, but not in the immediate future, so I, like Peter, think that #2 is the most likely result. So that’s good news for homebuyers looking to hold off buying for a little longer.

The bad news is, low rates don’t make getting the loans any easier. Banks have yet to loosen their grip on the lending guidelines that have been tightened almost to the point of strangulation after the sub-prime mortgage disaster. Only borrowers who can make sizable down payments, have plenty of assets, a steady job, and impeccable credit, are getting the loans at these low rates.

So even if you are waiting for a certain market to bottom out or mortgage rates to dip even further, it cannot hurt to look into the matters of financing now. That way, when you do wish to buy, you will know what you qualify for before looking to find that perfect home.

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Low Rates Low Prices Still Holding Off Buying A Home?

16 thoughts on “Low Rates, Low Prices….Still Holding Off Buying A Home?”

  1. direct marketing list

    Many say that housing prices will drop again that we are not at the bottom. My husband and I have decided not to buy right now to see what Obama will do – we are giving it a year.

  2. It depends on the situation, as always. If you have a down payment saved, good credit, and a stable job with emergency funds saved, and you can afford the payments, then now is a good time to buy for a great deal-if you don’t have these items in line; then you will have a tough time quilifing, let alone finding a home that you can afford.

  3. Hawaii realtor

    I like to show people the difference in payment if you compare a 30yr loan at 4.5% verses 5.5%. If you borrow $500k, (an average loan here in Hawaii) the difference is $300/month!

    Or another way to look at it – If rates go up to 5.5%, the house would have to drop from $500k to $445k to have the same payment! So even if the market goes down, you haven’t really gained anything if rates go up!

  4. I do think the same, once the economy recovers rates are going to go through the roof. So even in a year if prices are down a little but if rates are substantially higher one would still do worse buying in a year. There should be hyper inflation once the economy recovers because of all the stimulus money that has been pumped into the economy the last few years.

  5. I like to show people the statistics and difference in payment if you compare a 30yr loan at 4.5% verses 5.5%. If you borrow $500k, (an average loan here in Hawaii) the difference is $300/month!Or another way to look at it – If rates go up to 5.5%, the house would have to drop from $500k to $445k to have the same payment!

    Naruto Shippuuden’s last blog post..Kurokami The Animation 13

  6. “rates on 30-year fixed rate mortgages for borrowers with strong credit scores are likely to be in the range of roughly 4.6% to 4.75% at least through the summer.” I don’t think that this low rate is going to continue for ever and in my opinion you can not ask for lower rate than this.

  7. The media seems to starting to realize that they have a huge impact on the consumer confidence and in the past couple of weeks our local TV stations and print media have been cautiously pointing out that the recent statistics for home sales in the Nashville TN area have shown very encouraging signs. Cretain price ranges are showing of a rebound even to the point of homes being in multiple offer situations.

    The downward pressure on list prices is still there but the consumer confidence is slowly creeping back it seems.

    gary

  8. I think that this could be the time when one can really think of having some investment in real estate. May be later the idea doesn’t materialise.

  9. Forget low mortgage rates and the buyer’s market. Real-estate prices still have a long way to fall. Home prices and sales are tumbling even as mortgage rates are near all-time lows. Certainly there are great deals out there. It is a buyer’s market. The aggressive and opportunistic can probably find the worthwhile bargains.

    Cheers,Harry,Panama property

  10. Certificate of Deposit Rates

    And here I thought that as long as it house prices are down, it would be easy to buy one or get a loan.
    I was of the same idea that with what’s happening now, prices are bound to drop more. Thanks for the info.

  11. The situation will only get worse as people and politicians keep pushing for greater state control and less federal control.

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