Friday, July 30, 2010

Rate versus Price Reduction

July 29, 2010

We thought this would be good for anyone who is studying the market right now in order to calculate the right time to buy or sell.


This spot was sent to me by Paul Basil with the Basil Nelson Mortgage Group at Prime Mortgage. http://www.basilnelson.com/

Since the Fed's Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings…and rates overall are off their lows. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could well cost you more money in the long run.

Let's look at an example to see why. Say a home buyer wants to buy a home that costs $300,000. But the buyer wants a better deal on the home, so she delays a transaction until the home is reduced by $10,000. If, in the meantime however, rates were to rise .75% to 6.00% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $35,000 more than paying the $300,000 purchase price and locking in the 5.25% interest rate. In other words, the buyer would save $10,000 only to end up paying $35,000 more.

Now these prices and rates are just for the sake of example. But the point is that home prices are already very affordable…and rates are still low for now. So in the end, waiting for a home price to reduce may end up costing you much more than you expect if rates rise.

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Friday, July 02, 2010

National News - Pending home sales 'fell off a cliff' - Still a great time to buy value in a home!

By Les Christie, staff writer July 1, 2010: 11:10 AM ET


NEW YORK (CNN Money.com) -- The experts expected home sales to drop once the homebuyer tax credit lapsed at the end of April, but the depth of the decrease was shocking.

According to the National Association of Realtors (NAR), pending home sales fell a whopping 30% in May. Their index, which measures signed sales contracts but not closed sales, plunged to 77.6 from 110.9 in April. It's even off 15.9% from a year ago when the nation was barely emerging from the recession.

"The pending home sales report is a disaster," said Mike Larson, a real estate analyst for Weiss Research. "Sales fell off a cliff after the tax credit expired. It's the biggest monthly decline ever and the index is at its lowest level since NAR began tracking it in 2001."

Lawrence Yun, NAR's chief economist downplayed the damage a bit. According to him, customers rushed into deals to claim the credit, borrowing from May sales. Once the economic recovery comes into full swing, housing markets will heat up.

"If jobs come back as expected, the pace of home sales should pick up later this year," said Yun, "and reach a sustainable level of activity given very favorable affordability conditions."

Those conditions include much lower home prices and extremely favorable mortgage interest rates. The question is when -- or if -- the job market will ever bounce back.

"We're not creating jobs," said Larson. "The housing problems now are being driven by broad economic problems."