These suggestions come from David Stevens, president & CEO of the Mortgage Bankers Association (and thanks to Inman News for the interview):
1) MARKETS ARE STABILIZING. The real deliquency rate is down to 8.5% this year vs 10% last year. New foreclosure starts are down. Florida, Nevada & Arizona are stabilizing. All that means less bank-owned inventory, which would give private sales an opportunity to realize some stabilization and opportunity to sell at fair market value.
2) NEGATIVE EQUITY AND DECLINING HOME VALUES ARE CONCENTRATED IN FIVE KEY STATES. In fact, 50% of the total national foreclosure problem is concentrated in those 5 states, so Stevens says that those who quote declines in the average price of homes are using “dangerous data.” In fact, he claims that if the foreclosure sales are removed from total market data, the average sales prices of privately-owned homes would actually be up. Now, I have to say I’ve been claiming this about Indy for the past 5 years. We didn’t have a bubble, we didn’t have a burst. Our foreclosure inventory is moving to a reduced level almost daily. And good, clean, well-priced homes are selling at fair-market value.
3) THIS IS LITERALLY THE BEST TIME EVER TO BUY A HOME. 30-yr fixed rates are actually at 4%. No gimmicks, no tricks. Yes, 4%. They have NEVER before been this low. Did you know that a 2% increase in the rate for a 30-yr loan on a $200,000 house could cost you $87,937 in additional interest over the life of the loan? That is a staggering punishment for not acting NOW if you’re in the market to buy a house with the bank’s money! Some would-be-buyers worry about property values continuing to decline and are sitting on the fence. People! If a $200,000 house declines 5% in the next year, that’s only $10,000. Buying NOW could still save you $77,937 over the life of the loan, and who knows what type of equity you could build if you look beyond the short-term risk. You’ve got to live somewhere. That rental you’re in sure isn’t going to increase in value for you!
4) THE COMING HOME SHORTAGE. I said, “what?” But this makes sense! Gen Y is stabilizing professionally and coming of age. There are now 80 million Americans, ages 18-34 years old. They are the largest generation of Americans ever; even larger than the Boomers. And they will need a place to live pretty darn soon. They won’t be in college or living in their parents’ basements forever. And if you haven’t noticed, there’s not been a lot of new construction in the past 5 years or so. Home values are all about supply & demand. Giddy up, that’s good news when you think about it!
5) JOB CREATION AND TIGHT CREDIT. Stevens believes those two short-term problems are the biggest weight on the housing market. Jobs are obvious, and the tight credit situation is just the pendulum swinging too far from where it was before the crash in 06-07. Give it time, the jobs will return, and the lenders will loosen up a bit. It’s already starting.
Now, I see a lot of wisdom in these comments. #2 is a BRILLIANT way to look at the choice of “risking it” to buy now. I mean, I’ve been bellowing about these crazy low rates since they hit 4% (in fact, for years actually, because they were crazy good at 6% and then 5.5% and then 5% etc), but man, oh man, what would our parents have given to buy with money that cheap 30 years ago? And to realize that holding out to “see what the market will do” could cost that much money?! Also, #4 CURLS MY TOES. He’s so right on that thinking. Hopefully, all these production builders won’t go vertical fast enough and resale will have a chance on the fun-side of the supply & demand game.
Anyway, nobody can predict what will happen this evening, much less the future of the local housing market, but these comments give me hope. Hang in there and if you want to save yourself about $88,000 over the next 30 years, CALL ME NOW 🙂 Happy Friday.