Another reason to buy sooner than later …
If you’re a regular reader, you know that I disagree with the market cheer leaders that have for the past four years have pointed to this (what ever the current year is) being the year of recovery. Plain and simple my view has been that the pressures of the market will continue for several more years… my prediction is for a recovery somewhere between 2016 and 2020.
At the same time all is not doom… No I am not a pessimist! But a reporter of facts… not of individual factoids taken out of context to paint some rose-colored picture and create hopes that are only to be dashed upon the rocky shores of reality. My intent always is to give you the facts so that you can make informed decisions.
Please understand that there is no one answer that works for every buyer or seller. And even though you may have bought and sold multiple home in the past… understand that this is not the market of the past… this market is far from static… it literally changes by the day and the wise buyer or seller needs to align themselves with someone how really knows the ropes and how to properly informed you of the many and specific facets of the market that will impact your buy or sell position.
Yes prices will continue to drop… So many want to wait on the sidelines waiting for the bottom to hit if they are buying or for prices to rise if they are selling… Market timing is problematic in that you can only be sure of the market that has already passed… We will only know that we have hit bottom once the bottom is past and is no longer available.
It is still a Buyer’s Market in most markets… Remember there is not a single market; there are literally hundreds of markets in the Birmingham Metro area alone! Each one has a different set of dynamics and each has the potential of defying national statistical averages… as a matter of fact it is rare that a particular market mirrors those national or even regional measurements.
You need the facts on your specific market to make an informed decision.
Even so, there are factors, beyond the specific geographic markets or even the raw price of a home that impact the cost of buying a home, factors that apply to wider segments of the overall market.
Given that most home purchases today involve a mortgage… The cost of the mortgage is one of those factors that cross some market barriers. There is the obvious and more easily discernible cost of a mortgage know as the interest rate, we can watch those rates on a daily basis on the internet; although, those quoted rates may not be the ones that an individual buyer will qualify for… those are all based on the caveat: WAC: With Acceptable Credit.
Perhaps the most favored form of mortgages in today’s market is the FHA loan (eligible for loan amounts less than $271,050 in all Alabama counties other than Baldwin County) which is about to experience a fee hike. FHA loans allow for smaller down payments, as low as 3.5 percent compared to traditional loans, and they often have less stringent credit requirements, which have made them soar in popularity in recent years. About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages. Remember FHA insures loans but doesn’t issue them. Most financial institutions do FHA loans.
Home buyers with mortgages backed by FHA will soon see a rise in fees, the agency announced Feb 27, 2012. The agency is raising its fees in an effort to try to recoup some of its depleted reserves, which suffered from the rising number of homeowners who defaulted on their mortgages. The agency also says its raising fees to try to encourage the return of more private capital to the market.
In particular, FHA will increase two fees that borrowers pay. Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500, bringing the total cost from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount, The New York Times reports.
FHA also announced it will raise a fee for the upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.
For example, a borrower with a 3.5 percent down payment with a mortgage of $100,000 can expect to pay an upfront mortgage premium alone of $1,750, compared to the prior $750. This just one example of the costs that are rising as the banks try to re-coup their costs. Buying a bit earlier this strong that later will save you 1% of the purchase price…. But as always, have your trusted real estate advisor explain all of the specifics for each deal so you are fully in the know, as no matter how many homes you may have purchased in the past, today is a world where having someone in your corner is a very good thing.
May the market be with you.
