by Meg Seibert
on Tuesday, November 18th, 2014 at 3:18pm.
I have heard that buying a house is like having a baby: there's no absolute perfect time to do either.
In my opinion there are two major questions to ask yourself when considering purchasing a home. The first question asks “Is it a good time to buy in the market?” This question looks solely at the market data and does not depend on you. The second question is the more important one and asks “Is it a good time to buy for me?” This question has nothing to do with the market overall and looks at whether now is a good time to buy for you and your family given your current situation and expected future. Since I can’t really address the second question in this article I’m going to focus more on the first one. If we can determine the market is providing a good time to buy then you just need to determine if this is a good time for you personally. As a seasoned professional who has worked with many buyers throughout the entire real estate correction during the past 8 years I can help you walk through this personal process of answering the second question.
So you’ve answered “yes!” to the second question of whether it's a good time to buy personally so what are the reasons about the market for buying a home TODAY as opposed to a year or two from now?
1. Prices are good. According to the latest report from the Lancaster County Association of Realtors the average home price went up by 2.6% in the 3rd quarter of 2014 compared to 2013. While we’re not breaking any records this does indicate that the market is heading in the right direction. This will bode well for buyers who are buying into the market at good prices with an optimistic outlook for the future.
2. Rates are low. "Imagine paying over 18% interest on a 30-year fixed mortgage. It's almost unthinkable. But that was the reality for home buyers in October 1981 -- a year when the average rate was almost 17%," said Yahoo Finance. "The average rate has been 5.18% since the start of this country's history," making today's rates, which hover around historic lows at 4%, sound even better. Check out the mortgage calculatorto see how a different interest rate can affect your purchasing power.
3. Loan requirements are softening. They're not approaching the look-the-other-way-and-stamp-it-approved levels that led to the market crash, but the overly tough restrictions that followed have loosened. "Major lenders are making adjustments," said The Street. "Wells Fargo has lowered the minimum FICO score for borrowers applying for loans insured by the Federal Housing Administration to 600 from 640." They also count JPMorgan Chase's lowered loan-to-value "standards in certain markets for both jumbos and conforming mortgages." For buyers that can mean an easier road to loan approval, even without a ton of money upfront and perfect credit.
4. FHA/USDA loans make it even easier for first-time buyers. If your credit is less than stellar and you don't have a large down payment, an FHA or USDA 100% financing loan can get you in the door. Credit scores can be as low as 620 to qualify and only 3.5% down is required for FHA and USDA is 100% financing. Whether you've never bought before or have been out of the market for a few years, an FHA loan can be your answer. I have personally helped several buyers this year get into a home for less than $2,000 out of pocket.
5. Fewer buyers around the holidays means less competition for you and more negotiating power. "Sellers who are actively looking to sell their homes during the holiday months -- namely, October through December -- are serious about shedding the weight of their residences," said US News. "This often works in favor of savvy buyers looking to get a deal on discounted homes. Having less competition on the buyer's side can mean lower prices on homes, in addition to fewer counter-offers to compete against."
6. Rates are predicted to rise. "The Mortgage Bankers Association expects the average rate on a 30-year, fixed rate mortgage to rise slowly to 5.1 percent by the end of 2015," said the Washington Post. If you want to take advantage of low rates, now is the time.
7. Pent-up demand could zap affordability. "The housing market is about to get even more competitive," said Yahoo. "The pent-up demand of younger professionals, who moved back in with their parents during the recession, is about to explode. This eager subset of buyers will create some steep competition for homes, especially if they have been saving up to make larger down payments or high ticket offers. If the current homes on the market have more potential buyers, bidding wars develop, and the purchase prices are driven up.
8. "Buying is cheaper than renting in most markets," said Housingwire. With a little knowledge of loan options and low down payment programs, you can easily flip the switch from renter to homeowner. See my thoughts on Renting Vs Buying.
9. Because you want to buy a home. There really is no more compelling reason than that. You want it. So make it happen.