How do you overcome fears of buying and selling in today’s market
Anyone reading today’s new headlines might think the sky is falling. Between the stock market, crime, boarder issues, and mortgage rate increases, one might think that. However, when the smoke clears, it is important to think what’s behind the screen. In the case of issues that affect the housing market, here is a lay out of what you really should be concentrating on when making your decision to buy or sell in the next 1-4 months.
- Interest Rates
- Home Availability
- Market conditions in your local area
- Your Budget
- Down payment
- Your time line of ownership i.e., your forever home or temporary purchase (3-7 years)
I will discuss each item as above.
- Interest rates. Today’s buyers are reacting to the rise in rates in 2 ways. 1) buy now, or 2) wait it out in hopes rates will fall. When you look at the historical picture, rates are still comparatively low. I’m sure you know people who have had had 15-19% interest loans. But studies have shown that the average 30-year fixed rate mortgage of 5.5% is below the average of nearly 8%. We have gotten used to mortgages being in the 3-4% range. It is doubtful we will ever see rates like that again. If you wait you could be waiting a long time, loosing valuable time to build equity in a home you purchase today. Some people think they can just rent and save money. However, by renting you are helping to pay someone else’s mortgage, and rents are rising even higher than interest rates. Also, ongoing inflationary pressure may push rates even higher in the next few months.
- Home availability. The market has had a problem with inventory. Some buyers have been up against multiple buyers on the same property. It can get pretty depressing to lose your bid to someone else. The average time from listing to sale in VA Beach is 50-70 days. It is anticipated that due to inflation and rising interest rates, home prices may drop. Don’t count on that happening any time soon. This is caused by inflation rather than a real estate bubble, that we had in 2008-09. The best way to combat this problem, is to have a realtor who is constantly watching the inventory and ready to move to make an offer in the first few days of listing.
- Local Market Conditions. The Real Estate market varies greatly from area to area. You have heard everyone wants a house at the beach, or near transportation, or close to shopping, or preferred schools. Again, having a good Realtor who knows the area you are interested in, can guide you on these amenities. They can also prevent you from overpaying in this competitive market. A competitive analysis of the area also will reveal the value in the home you are looking at. There are web sites that also provide this information.
- Your Budget. One of the first steps in looking for a home includes getting a pre-approval from a LOCAL lender. Out of state or on-line lenders tend to only be available during limited working hours to answer questions or to field problems. Having someone who knows the area and is responsive is key. Most lenders will help you work with credit issues, down payment, and other financial hurdles you may need to fix in order to qualify. Local lenders also have a reputation to uphold, and usually have better customer service. It may be, that your income just doesn’t qualify you at this time.
- Down Payment. Generally, a conventional mortgage will require a small down payment. However, there are many other loan types that offer significant decreases in the percentage. This is where your lender is involved in getting you the best deal. The VA loan is still the best rate at 0% down. There also may be local programs that can be accessed to help with down payments.
- Your personal time frame. Naturally someone in the market for their “forever home” has different ideas of a home, than just needing a place to live temporarily. General rule of thumb is that a purchase is better than renting, if you intend to stay for 2 years or more. However, the recent run up of prices, has made the purchase of a home an almost immediate increase of equity. If you bought your home last year at the national average, and sold today at the national average you would have realized as much as a 20% gain.