It is time to revisit the whole idea of buying and selling in a down economy Real Estate market, whether you are in and around Dallas Fort Worth or in Collin County. One thing is for sure, you do not know, I do not know, and the gurus of our economy do not know exactly and definitively when our markets will increase, and how fast they will increase when they do. As long as you are buying homes in the down market, where you are probably getting a pretty good deal on a home, it is not so bad having to sacrifice selling your home at a lower amount than you hoped…it is a wash.
A very good reason has now made it’s way to center stage when considering this subject now too. CNN Money wrote an article about this weeks back. Word is, and it has been for some time now, home loan mortgage rates are expecting to go up soon. That is what happens during and after an economy recovers from a recession. Yes our economists have learned from history and can do a very good job minimizing this, but it is inevitable. Rates have been too low too long. As I wrote in a very recent blog titled, “Bernanke Ceases Buying of Mortgage Backed Securities, Expect Higher Rates Soon”, there are a solid number of economists that believe mortgage rates will to start going up this Spring, and especially to the actions of Bernanke, where he ceases buying mortgage backed securities.
In the aforementioned CNN article by Beth Braverman, the most relevant variable regarding the entire process of selling followed by buying in this market, was made. She wrote, “Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today’s 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that’s an extra $174 per month.” Well, the Fed did just that.
Speaking in terms of ‘real money’ whats giving up a couple grand on a home around $150k or giving up say $10,000-$15,000 on a home in the $250k+ range, when you are going to be forced to buy a home at least that much cheaper do to comfort level in your monthly payment when rates go up. The issue with that will be; you have already savored a taste for a certain home, so you will likely just bite the bullet and deal with the higher payment on that home, where over time that money you lost on your home will be eaten up 5 times in the financing of the new one with the higher payment.
Have faith in the fact that Real Estate is the one investment, that over time, always appeciates.
If you are a builder, sell the homes you have to sell, reduce to maximum appraised value (new homes will sale today at appraised value, almost guaranteed), and get your new inventory ready for the rising market. There is some housing cleaning that you need to do, to clear lines of credit, and mend relationships with banks and money sources, so you can move into the new vibrant market to come without dragging an anchor into it. It is said that one who plans to plant a lush garden does not set aside a plot for weeds. Get rid of the weeds in your inventory, and focus on the lush garden to come, because of you are still fighting the ‘weeds’ when Summer comes, you are just that much more likely to mis the maximum benefit of the future lush market.