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Just read on cnn.com that New Home sales were down again. Regardless of what you think for the future, and what the RDU area has going for it different than the rest of the country, I am just trying to do a little forecasting and I hope some of you can help this first-time buyer to understand what he will be walking into in the next 6-12 months - I plan to move to Raleigh/Durham by the end of the year and hopefully buy shortly thereafter.
Let's just say the housing market continues to be bad...or at least not improve.
Does this have any effect on interest rates, or are they independent of one another?
I understand that I can assume that the chances of getting more incentives and a better negotiating position as a buyer in a weaker market....but are there any DOWNSIDES for me?
The immediate one I see is that if rates continue to climb, then I may be buying a cheaper house with a higher rate on my loan...which isn't fun.
So I guess my three questions are:
1) Are interest rates at all causally tied to the real estate market? I know everything is at least loosely related, but I mean on a broader scale.
2) All non-selfish reasons aside, do I have ANY reason to root for a turn in the housing market?
3) Is there any unavoidable downside to me, a first-time buyer with no home to sell, if the market continues to be bad through the next year?
The Triangle will be affected by the downturn although i am hard pressed to see any sign of it currently. I would be cautious about paying full price on any house right now regardless of whether you plan on staying in it long term.. My opinion, but Triangle residential prices are in nose bleed territory right now with limited upside and great downside potential.
1)Interest rates are based on a lot of things one being what the fed reserve sets the rates at there quarterly meeting. They do take into account what the housing market is doing but its hard to say what rates will do.
2)Once you buy your house you will want the market to pick back up but for now the market dropping will probably help you. The only downside is that the housing market is tied to the overall economy and you don't want to see that drop.
3)Not that I see, Only people that are being hit by the market drop are those looking to sell and those with adjustable rate mortgages that plained around the value of there house going up.
1. No, rates are not causally tied to the real estate market. Let me rephrase that, the real estate market doesn't causally affect interest rates. But interest rates DO causally affect the real estate market.
2. What's your occupation? Does it directly benefit from an up market? If not, then what's wrong with buying in a down market, especially if you planning on holding it for a while? Isn't buying low one of the the most basic investment strategies?
3. None that I can think of...don't get caught up with a bad news syndrome that colors everything negatively. Bottom line, as a first time homebuyer, or rather as an anytime homebuyer, a sales decline puts YOU in the driver's seat. Enjoy the ride....
..and one more thing about rates. Just look at the numbers and see how little you'll actually be hurt. Take a hypothetical $125,000 no money down mortgage..at 6.5% your principal and interest payment (not counting taxes, insurance or mortgage insurance) would be $790.09 a month. Now let's look at a 7.5% rate...that same payment would now be $874.02 per month. More definitely, but hardly a number that should keep you out of the market
ChipL - actually, I wasn't getting caught up in the bad-news syndrome, I was finding myself getting uncontrollably giddy with each negative housing report and I thought to myself "hmmmm this can't be ALL good for me....maybe I should make sure I'm not rooting against myself here...."
My occupation isn't generally tied to an up-market - it helps, sure, but I'm not a home appraiser or anything like that
I think I will continue to bet on the "Don't Pass" line quietly...and please forgive me, all of you with homes to sell and homes you hope will appreciate. I will be back on your side within the year I swear!
All good info above ,but I would caution that the Raleigh area is not in the big down turn that alot of the country is facing, this area is and I believe will continue a upward price move. I think the last percent I read was 15% up in the last year for Cary/raleigh. So in a nutshell if you think prices will drop here I would caution you that it will get tougher to buy in NC not easier, now Mich or the North East you could buy on a down market which would benefit a first time buyer if you time it right. NC market has been good and steady no bubble and prices were low two years ago now metro areas are high and going higher longer you wait the higher the prices here.
I'm not overly worried about the interest rates as of yet. When we bought our first home in 1995, we got a 'first time buyers' program through the state of Ct, which was a slightly lower rate than market-it was 7.38
Seems so high now, but it was great then. We never did refinance (sold in 2005 and am awaiting the move to Raleigh, then buying again). We bought cheap with a then-higher rate. We sold high and made out-I'd do it again!
I am home inspector and basically my entire family is involved in different aspects of real estate...be it lending, appraising, selling or inspecting. The ONLY thing holding us down AT ALL in this area is the ability for people moving in from out of state to sell their houses. We have seen a constant upturn for over 5 years now here in our business, and we have been around over 25 years. We may peak someday, but this area will not crash anytime soon unless something severe happens to the nationwide economy. I am glad other markets are slowing down some as it keeps us more in check. This is more a buyers market than a sellers currently. Just my .02.
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Eventually,
