Look up "Elliott Wave" and "Kondratieff Wave"
Posted on 09/18/2009 4:18:26 PM PDT by SeekAndFind
If you've been waiting for home prices or interest rates to fall further before you buy a home, it's time to rethink your strategy. If you act soon, you'll be able to take advantage of historically low prices and interest rates that won't be around forever. And if you're a first-time buyer and you act very soon, you can still take advantage of an $8,000 tax credit. Here are five reasons to take the plunge now.
1. You may get a fat tax credit.
The first-time home buyer's tax credit is worth 10% of the home's purchase price, up to a maximum of $8,000. But to lock in the credit, you must close on your purchase by November 30. Given that it usually takes a minimum of 30 to 45 days to get to closing after you and the seller have a ratified purchase contract, your real deadline is closer to October 1.
You don't qualify for the credit if you owned a primary residence in the past three years. And the credit begins to phase out when adjusted gross income is more than $75,000 for single filers, or $150,000 for married couples filing jointly (those with incomes of more than $95,000 and $170,000, respectively, will not receive a credit).
Although several bills before Congress propose to extend or even expand the credit, don't count on it. Legislators are preoccupied with health-care reform and concerned about increasing the federal deficit.
The desire to lock in the credit pushed Ari Weitz, 27, of Atlanta, to buy his first home in August. Weitz began shopping in Inman Park, a vibrant neighborhood in Atlanta's Old Fourth Ward. In April, Weitz found a 1,700-square-foot townhome with three bedrooms and three and a half baths that he really liked. It was listed for $275,000.
His first two offers of $240,000 and $250,000 with $5,000 in seller-paid closing costs didn't fly, but Weitz monitored the status of the property. When he learned in July that the owner was moving out of state and had to sell, he offered $254,000. That offer was accepted, and he got the $5,000 in closing costs, too.
2. Prices are scraping bottom.
It's hard to know whether prices are as low as they'll go, but the housing market is showing signs of life. Between the first and second quarter of 2009, the S&P/Case-Shiller Home Price Indices, a measure of U.S. home prices, rose by 3%. That's the first quarter-over-quarter increase in three years.
Robert Shiller, an economics professor at Yale and a developer of the S&P/Case-Shiller Home Price Indices, says it's too soon to call the uptick a turning point. He says that it may indicate only that the decline in home prices-some 30% since the housing market's peak in mid 2006-is slowing.
The National Association of Realtors (NAR) says homes haven't been this affordable since the 1970s. Based on average income and median home price, a little more than two-thirds of California households could afford to buy an entry-level home during the second quarter of this year, compared with just less than half a year ago.
3. Foreclosures are at record highs.
Distressed sales (foreclosures and short sales) accounted for more than a third of all home-sale transactions in the second quarter of 2009-and represent an opportunity to buy a home at a deep discount.
Such homes typically sell for a 15% to 20% discount from market value. California, Arizona, Florida and Nevada continue to experience the sharpest price declines. Foreclosures will continue to rise with the jobless rate and the last wave of subprime-mortgage delinquencies, despite relief efforts by lenders and the Obama administration.
There are caveats. When REOs (real estate owned by the bank after foreclosure) hit the market, the banks receive multiple offers, often above full price. The banks prefer investors who will pay with cash over "regular" buyers who must seek financing, and they prefer conventional financing over Federal Housing Administration or Department of Veterans Affairs loans.
Buyers think foreclosures are a great deal until they see them in person and realize that often, they need a lot of work. That puts off entry-level buyers who need to save their cash for a down payment or furniture. You're more likely to find a bargain if you work with an agent who handles a lot of foreclosures and gets a heads-up on sales before they hit the market.
Short sales can also be dicey. A short sale means the lender is allowing a home to be sold for less than the mortgage amount. Short sales require patient buyers who can wait out the two to six months typically required to get approval from the bank. Meanwhile, the deal may fall through because the sellers disappear or choose not to cooperate with the process. Or the property could end up in foreclosure because the sellers haven't made their mortgage payments.
4. Rates are cheap.
If there's a silver lining to the recession, it's that interest rates will stay low. That's because investors continue to seek the safety of long-term Treasury bonds, which largely determine mortgage rates. Throughout most of this year, the 30-year fixed rate has hovered near 5%. The 5/1 adjustable-rate mortgage, which has a fixed rate for five years and then converts to a one-year ARM, recently averaged 4.8%.
Keith Gumbinger, who closely follows interest-rate trends as vice-president of financial-publishing firm HSH Associates, expects the 30-year fixed rate to stay around 5.5% for the rest of 2009, absent either a market collapse or economic growth (especially stepped-up hiring). He says that downward and upward forces on rates are canceling each other out right now.
If you can qualify for a mortgage on the home you want at today's rate, holding out for a slightly lower rate is probably a fool's errand. And, if inflation resurges, locking in today's interest rate (and mortgage payment) will look brilliant in hindsight.
To get the best rate, you must put 20% down and have a credit score of 720 or more. Many home buyers have turned to FHA-backed loans, which require a minimum down payment of 3.5% of the purchase price (see Can You Get a Mortgage?).
5. Demand is growing.
In July 2009, existing home sales rose 5% over the year before-the first year-over-year gain since November 2005, according to the NAR. That period also marked an increase in sales over four consecutive months, for the first time since June 2004 (except in the West, where sales fell by 2% between June and July).
The NAR reports that the number of homes for sale fell by 11% from the year before, and at the current pace of sales, that represents a 9.4 months' supply (a four- to six-month supply represents a market balanced between buyers and sellers).
In some areas, competition for deals can be fierce. Atlanta's Debbie Sonenshine, of Coldwell Banker, says that a good house at a good price will get multiple offers and sell quickly. What's a good house? It's clean, it shows well, and it's in a good neighborhood in a good school district.
HOw many points?
Low interest rates are keeping me from buying. they are holding up the prices of houses too much. Once the interest rates rise, and the asking prices go down, then I will consider buying. But the worst time to buy a house is at the trough of an interest rate cycle.
[3. Foreclosures are at record highs]
Yeah, but here in Vegas listings are down. There is a missing shadow inventory. My own feeling is that the whole system is rigged and they are reinflating the bubble. If you are going to buy, don’t be exorbitant and buy cheap.
And the taxes are going to start rising, and the layoffs will continue.
There is nothing positive about this economy right now.
“We are seeing a lot of buyers in the soCal market.”
My Uncle, who is only a few years older than me (long story) hit the big time with CA real estate. He bought your basic Spanish-looking 3 bedroom on a cul-du-sac about 20 years ago. He commuted to LA for many years...2 hours each way each day.
Paid $150K for that house. Sold it five years ago for $650K!
Bought a motor home and he and the wife and their two boys (just finishing HS) lived in it for a year while they built a house in New Mexico (to be near her family) and got 10x the house and land for about $200K. Granted, it’s New Mexico. Not much to see but scrub brush from any window in his house, but they like it. My aunt grew up in the desert, so she’s very happy. :)
And he hasn’t worked a day since 2000; pretty much retired at 50 on that real estate gold mine. :)
It is an excellent time to purchase...In our area of So. Cal the inventory shrinks as properties only seem to last about 1 to 3 months, and they're sold...And you know these are qualified buyers going in because that is the *first* thing the RE agents look at nowadays.
After this fiasco owning is not what it is cracked up to be. You sure can’t call it an investment. There is all the upkeep, taxes and you are tied to the house and immobile at a time when unemployment is climbing and not expected to stop any time soon. If I could do it over again I would rent and save my money. Government wants you to own a house so they can keep you paying for what they decide you should pay for. People will generally do most anything to keep their houses and they know it.
I too agree we have a large inventory, but I also see some longer term problems on the horizon. Us baby boomers are probably not going to aleviate to oversupply, as most of us are no longer in home-buying mode. The other thing we’re gonna do is add to the inventory as we die off or go to the old folks homes. Don’t forget we are a hugh population spike traveling thru time.
Look up "Elliott Wave" and "Kondratieff Wave"
>>1. You may get a fat tax credit.
Which is inflating the demand and price. Without it (when it expires) your home value will drop accordingly.
>>2. Prices are scraping bottom.
I beg to differ. I believe that all our spending is leading to inflation, and will lead to much worse inflation. That means that all the ARMs will flood the market, further lowering prices.
Of course, inflation might mean that you can sell your new purchase for more “dollars” than you bought it for, but that don’t mean an increase in value.
>>3. Foreclosures are at record highs.
And banks are still hiding much of this. Foreclosures will worsen. See #2 above.
>>4. Rates are cheap.
This acknowledges that the rates offered (get a fixed rate, for God’s sake!) are cheap compared to the inflation that is occurring and will occur.
If you buy a home, the only reason is because you need a place to live. The asset is not the house, but the fixed rate loan. Inflation means the bank loses, and you pay it off in easy-to-earn scrip.
5. Demand is growing.
Nonsense. Statistical “year-over-year” doubletalk. If you want a real idea, go shopping. If the deal are good, demand is weak. If demand were growing, many sellers (including foreclosing banks) would be patient and hold out for higher prices.
SUMMARY:
Don’t buy on the way down. Only idiots try to time the bottom. Unless you need a house to live in and can’t find an acceptable rental, wait until the market is rising well. Prices in some areas could drop by half again.
The second dip is going to lay there for a while.....The upside of the W will not be seen until Obama and his socialist energy policy, heatlhcare, national defence, etc are history.
Don't expect the W to complete itself for a long time....oh, and avoid new debt like buying a house right now. Your job may end up a victim of the economy.
Be sure you understand the “pay back” connected to that $8,000
Probably a good idea if you are entering the higher end of the market. The next wave of defaults and foreclosures are coming on funny-money jumbo mortgages, which means big ticket houses are rapidly sinking under water.
Sure its a great time to buy, if you still have a job...
'The People's Republik of Madistan' most likely wouldn't use air power...too big of a 'carbon footprint' for the local EnviroWeenie Hippies left over from the 60's that now run the show around here, LOL!
That will come in February 2011
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