If you want to buy a house but have been waiting on the sidelines for the market to bottom out, it’s time to rethink your position. In making any decision, it’s important to consider the environment you’re operating in. And today’s real estate market environment is on the verge of the most rapid and thoroughgoing transformation since the end of the Great Depression. New government regulations, demographic changes and a host of other factors will totally transform the way we do business. You can’t afford to ignore these changes!
Cost Of The Loan
Sale price is only part of the equation when you’re making the decision to buy. You have to figure in the cost of the loan as well. The historically low mortgage interest rates we’ve enjoyed for the past three years are about to vanish. The market is poised to make gigantic changes in the coming months and if you’re blinkered by adhering to the sole criterion of “lowest price” you could miss out on a great opportunity. The market is about to become a leaner, meaner place and it’s important to lock into lock yourself into a good, low mortgage rate now before the rates skyrocket. We’re looking at a confluence of proposed legislation and environmental changes could make housing loans smaller, harder to qualify for and much more expensive.
Interest Rates
In 2012, the interest rate is expected to be 5.7 percent. Even a half-percent increase in mortgage interest can add a hundred dollars or more to your monthly payments, depending on the amount of your loan. MoneyWatch.com’s Carla Fried gave a hypothetical example of what a 5.7 percent interest rate would mean in terms of real money:
“If you take out a $300,000 30-year fixed rate loan today at 4.6 percent your monthly tab will be $1,537. But let’s say you instead decide to wait another year or more on the theory prices are heading lower. If during your wait the 30-year fixed rate rises to 5.7 percent you would need home prices to fall nearly 12 percent to come in at the same monthly mortgage cost as what you can get now.”
This graph from the BankRate.com web site shows that interest rates are beginning to rise again. The site explains that, “The 30-year fixed-rate mortgage, considered a bellwether home loan, rose 6 basis points to 4.71 percent from 4.65 percent. Other mortgages followed a similar pattern. The 15-year fixed mortgage climbed to 3.86 percent, up 7 basis points. (A basis point is one-hundredth of 1 percentage point.) Another fixed-rate product, jumbo mortgages, which generally are those for more than $417,000, hit 5.2 percent, up 1 single basis point.”
In short, new regulations and changes in the market environment will trigger a sharp increase in mortgage interest rates and cause the actual cost of home ownership to increase dramatically. In the words of Washington Post columnist Kenneth R. Harney, “Take a snapshot of today’s mortgage market conditions and frame it, because it’s highly likely you’ll never see anything like these favorable combinations of rates and terms again.”
Ashley Leigh of Linton Hall, Realtors® says that indicators already point to a market that is on the mend, “The market has gone up 40% in the last two years and will continue to rise. Now is the time to jump in and buy. If you wait too long, you won’t be able to afford to be part of it.” Leigh adds that since market conditions are changing rapidly, “you need to lock in on a favorable interest rate quickly. At Linton Hall Realtors we offer a prequalification service so that you will know exactly how much you can borrow and at what rate. Being a prequalified buyer demonstrates to sellers that you are ready, willing and able to close a deal.”
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