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Well, in just two days, interest rates have dropped close to .75 basis points or close to a $120 savings per month on a 200k loan. So how does this factor into increasing affordability? How bout the hundreds of thousands that will refinance and also receive the savings?
Seems to me that we're in unprecedented times... and the government is pretty much doing everything in its' power to give homes away to home buyers. A few weeks ago home buyers were waiting because the general consensus was that interest rates were going to go up, so home prices would go down. But, low and behold, interest rates went considerably down.
Are there any buyers out there? Or are they still waiting? With interest rates low, prices lower, inventory high, inflation high, tax credits and incentives, man would it be a great time to buy. I envy those looking to buy. I don't think this mix of events has ever occurred in history.
I think the key picture, is if the economy can stabilizes, and new job sources come online (energy, renewables, drilling, medical, international exports, production, technology), things would really pick up. Did the government just planted the seeds for the next RE boom?
As for our area of Socal, the Inland Empire, it's good for people from the OC and LA that are shopping and think 350k homes are a good deal. Plus if they are trading up (or down) they still have equity left to use. Unfortunately,for the majority of the IE, it's still not affordable even with rates taking a dip. Most of the IE has dropped in value so in order to refi, consumers can't be in the red. I dont see it triggering a refi craze at least in our area.
We're in the middle of a home search and were just talking about it this morning. Incredibly lucky-- we did expect rates to be higher by now and with this move, they've gone lower.
How does it effect our decision/pace? Not much.
We have several variables (not all financial) causing us to foot drag. We were anticipating prices were going to drop more, and we still believe that based on local inventory levels and market activity.
The rate drop (which could be temporary) only makes us more comfortable waiting. Before, we were prepared to wait out prices as rates rose. Now prices are going down and rates? Well at least they're not up yet.
I honestly wonder if more buyers would be off the fence if rates were at 8% and climbing right now. Carrot or stick? Hmmmm.
Bottom line for us: We do feel lucky. If the right house/right price shows up, we'll buy it tomorrow. If any of our tricky variables resolve, we may make a move now just because rates are low-- but I'm not betting on it.
What do other people think? Are lower rates or higher rates a bigger motivator to fence sitters?
Real estate is all about perception. I keep hearing real estate is going to start booming again. I know my fingers are crossed!!
Certainly having better interest rates can not hurt the situation. Also the $7500 tax credit for new buyers will help. I know zero down is going away, but for another year all the buyers will be able to use that $7500 as part of their downpayment. Buyers can take it as a tax credit on their 2008 taxes as long as they buy by August of 2009. (I think August is correct, but I have all of that literature at my office. So please correct me if I am wrong.)
Here in the NY things are still pretty much a standstill. While there are excellent incentives for buying right now there are still some significant factors that are affecting the market and buyer confidence.
My local paper just released the following stats on our local market:
-Median sale price for detached single-family homes fell to $291,000 in August, down 11.3 percent from $328,000 in August 2007. -Number of homes sold in August fell 29.2 percent.
So what's holding buyers back?
Prices- Well for first time buyers it's home prices. Even with prices falling many first time byers can't quailfy for a mortgage based on income. Ave median household income in my county is listed at $72K. That leaves any home priced at $250 or more out of reach of most first time buyers.
Job Security- The northeast has been hit particularly hard with layoffs, ironically enough those tied to finance, real estate and home construction. So the desire to 'trade up' is the furthest thing on most peoples mind at the moment... they are waiting to see when we finally hit bottom.
Cost of Home Ownership- Again the Northeast has been hit extremely hard with energy costs, utilities and property taxes. Unreasonablely high assements based on 2005 prices has led to many from buying a house they could mortgage, yet taxes they can't afford. Heating oil is averaging $4.60 per gallon and electric has gone up 30% with most providers.
In a nutshell the economy for middle America is still not healthy and many buyers are holding off despite the many incentives to buy. I know I bought last spring, and while I don't have any regrets (I love my home) I still wonder how much I could have saved just waiting another 12 months.
There is more interest here in South Florida...but what I can tell you is the affordable homes (Less than 300K here) are almost exclusively ALL short sales. I have been searching for a home as well and 95% of the dozen homes i have seen thus far have all been short sales.
Prices still need to drop more to have more AFFORDABLE inventory...that is the key. There is a lot of inventory, but much of it is NOT AFFORDABLE. That is why so many defaulted on their loans to begin with !
With interest rates low, prices lower, inventory high, inflation high, tax credits and incentives, man would it be a great time to buy.
Are you serious? Yeah a great time to buy a depreciating asset. Tax credits? You mean an IRS loan. Also, just a thought if rates are low than perhaps...just perhaps inflation isn't really high? High inventory....wait doesn't that mean prices should trend down?
The drop in interest rates changes very little, the rate for a 30-year fixed is about where it was in the beginning of June, it was less earlier in the year. Was it a great time to buy in May/June? No, why is it now? Its not. Stop drinking the Kool-aid.
Also, I swear some people think that magic money is funding mortgages. Its endless! Its not, any increase in demand of mortgages in the market place (by refinancing etc) is going to be meant with increase rates. Supply and demand.
Quote:
Did the government just planted the seeds for the next RE boom?
Ha! Dude, what are you smoking? If Fannie/Freddie stay under government control (Fannie use to be) that is bearish for real estate. There will be even less funny business than there was before. Even if they let them go private again, its going to be in a much different form. The systemic risk has to be removed before they can go private again, but that is again bearish on real estate.
Real estate is toast. Real estate booms hurt the country, that should be extremely obvious by now.
Are you serious? Yeah a great time to buy a depreciating asset. Tax credits? You mean an IRS loan. Also, just a thought if rates are low than perhaps...just perhaps inflation isn't really high? High inventory....wait doesn't that mean prices should trend down?
The drop in interest rates changes very little, the rate for a 30-year fixed is about where it was in the beginning of June, it was less earlier in the year. Was it a great time to buy in May/June? No, why is it now? Its not. Stop drinking the Kool-aid.
Also, I swear some people think that magic money is funding mortgages. Its endless! Its not, any increase in demand of mortgages in the market place (by refinancing etc) is going to be meant with increase rates. Supply and demand.
Ha! Dude, what are you smoking? If Fannie/Freddie stay under government control (Fannie use to be) that is bearish for real estate. There will be even less funny business than there was before. Even if they let them go private again, its going to be in a much different form. The systemic risk has to be removed before they can go private again, but that is again bearish on real estate.
Real estate is toast. Real estate booms hurt the country, that should be extremely obvious by now.
At least there's one thing we can agree on.
IMO, a house is almost always a depreciating asset, like a boat or car. On a rare occassion, however, an antique car or boat does appreciate as a collector's item.
I don't think we will see a huge boom of real estate anytime soon. Prices moved up too fast, and it will take several years for incomes to catch up (and/or house prices to come down more). Also a mortgage is harder to get (wow you actually have to prove that you have income plus have a downpayment LOL).
In my area prices haven't gone down all that much. Houses that sold for $105,000 in 2000 are now selling around $170,000 (at the peak they were selling for $180,000 and up). Call me when they start selling for around $130,000 - $140,000.
It will be a few more years before I buy. I almost bought a house this past summer and I am soooooo glad I didn't! I'm not going to throw money away by buying a house that will be worth less next year. Plus rent is much cheaper. I am using the money I save by renting to pay off all of my credit card/car loan debt.
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