Rates Are Creeping Up

Here's a shout out to all those buyers out there who are waiting to be sure that real estate prices have hit bottom:  You may succeed in buying when prices have passed the bottom, but you may lose on rates.  Although the Fed has signaled that it won't be raising its rates any time soon, the mortgage rates are more creatures of supply and demand, as well as bank appetites for new loans.  Rates also tend to follow a seasonal pattern--lowest at election time (what a surprise!), and higher in the busiest spring buying season).

 I get rates sent to me on a weekly basis, and it's clear that they are headed up.  If you have waited this long to buy, don't make the mistake of continuing to wait.  They may go back down in the fall, but, by then, prices will have risen.  Buyers have increasingly begun to think of the cost of housing as the cost of the monthly payment, since that matters far more to them than the actual price of the home at any given time.  Not only are mortgage rates heading higher, but insurance and taxes have risen in most places as well.  Buy now, or regret it later!

Thinking of Waiting for Spring?

At this time of year, we often hear people say that they are putting their searches for property on hold until the spring. While we understand the appeal of taking an item off the To Do list at this busy season, I want to point out the possible consequences.

Savvy buyers don't talk about the price of the property, they talk about the monthly payment. Current mortgage rates are so low that the cost of risking an increase in rates almost surely outstrips the risk that you might buy now and have prices decline slightly before they rise again. The low rates also trump any idea that you have to bargain for the last nickel. Take the deal, lock in the rate, and gloat later.

Many consumers are acutely aware of the aspects of this housing market that favor buyers. They therefore think that, regardless of what a property is listed for, they should offer 20% less. They seem to believe that sellers are desparate, and that they need to bottom fish in order to purchase now. Since only the well-priced properties in good condition are selling, it's not even really true, as I have pointed out before, that there are so many things to choose from that such a strategy can succeed.

Let me remind any such people that this market is not a zero-sum game. Both the sellers and the buyers can win. The sellers can sell and repurchase at the current lower prices, with the lower interest rates. The buyers can buy and also take advantage of these rates. Everyone can walk away better off. This is an unusual time in that respect. If you figure out what the monthly payment will be, you may discover that it makes far more sense to buy and move than to wait.