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inception937, Elke Mariotti has given you some excellent guidance about the effects of rising interest rates, even if house prices show further declines, on the monthly mortgage payment.
Yeah but doesn't it make more since to buy low, because even if the interest rates are higher you can refinance in the future and lower your payments? You can lower your interest rate but not the price you paid for the house.
Yeah but doesn't it make more since to buy low, because even if the interest rates are higher you can refinance in the future and lower your payments? You can lower your interest rate but not the price you paid for the house.
Only if interest rates, after first rising, then decline.
While all markets fluctuate, higher then lower or lower then higher, when today's historically low interest rates reverse direction and head higher, the subsequent declines may not bring these interest rates back to today's historically low levels; and, if that is the case, then refinancing will not lower the mortgage payment.
Do you think home prices will come down much further on long island? I don't. My suggestion is if you find a good one, buy now. If not, keep looking and don't settle. The market won't change significantly over the next few months.
The market won't change significantly over the next few months.
Unless there is a growing consensus that Obama will be One and Done, then pent-up demand for houses, based on the idea that the next administration will remove each and every one of Obama's economic destroying policies, will turn the housing market around in quick fashion.
If one is renting, has a 20% deposit, a good credit rating, and steady income of about 20-25% the cost of the home...yes, now could be a good time to buy.
Personal opinion/choice here: Rather than the suggested price range of 4 - 5x the income, I look for a house that is 2.5x (max 3x) my income. It seems that if all along everyone adhered to <3x family income, house prices would have stayed affordable.
It seems to me that paying for a house 5x one's income can strain finances and turn us into slaves of the house. Or could it be just an optimistic view of one's future success in life (and the economy) at the time of purchase?.
Not to be apocalyptic or anything, but after the housing bust, a much bigger and devastating retirement bust may be in the working... If social security is a Ponzi scheme (it has many signs of one), those of us who have to work for some time before retirement, may be on our own at old age. Relying on the government to provide life savers at that point is unlikely to work.
Seems to me, we need to learn to save, live with less, live within our means. It seems hard to do that if you are tied for say 30 years with a house that drains finances...
As Elke pointed out while prices could become cheaper, actual affordability could still increase if rates go up.
Now of course no one has a crystal ball of where rates or home prices will be so its a guessing game. With that being said, with prices down as they are, the amount of homes on the market, and rates where they are, now is certainly a better time to purchase a home than anytime in the past few years.
It's better to buy cheaper with slightly higher interest rates and buy still inflated housing at the lowest possible interest rates.
Unless you think banks don't calculate interest rates into affordability. Ie, you make 150K, you can afford a 450K house!!! At what interest rate? if you think that interest rates going up won't have a negative effect on housing prices, you're wrong.
That being said, buying a house isn't just an investment, it's about having a stable place to live and putting down roots.
Trying to time the real estate market is similar to timing the stock market: you won't know when you hit bottom until it's on the way up!
If you want to buy, start looking. If you see something you like, buy it; no need to rush--you never know how long it'll take you to find the right house, so why not start now?!!
For the last few years I would have said that Elke was just doing her job promoting the real estate market but now is the time to buy. In 2004 I advised that we were experiencing an artificial bubble and as we went through it I warned people to stand by and utilize restraint. However if you have been following the market you will know that although there has been no real stabilization at this point there will be an upward trend. Interests rates are about to rise in tandom with the crisis's taking place in Europe.
That being said, Don't be in a hurry. Exercise prudence. Wade into the short sale market. It is extremely easy and isn't too time consuming. Real estate agents are much more adept at them then 3 years ago and you have plenty of room to low ball. You may find a gem with little or no required maintenance. I know plenty of people that went through the process and came out winners.
Good luck
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3x rule
