Hmmm. I would think that a prudent reason for not buying now, is if you don't qualify at the moment (either you're waiting for your bankruptcy discharge to reach its 2-year anniversary, still saving up for a down payment or had the misfortune of being laid off, etc.).
If you do qualify however, here's something to chew on: U.S. house prices unexpectedly advanced in January, according to a report from the Federal Housing and Finance Administration on Tuesday. The report showed a 1.7% month-over-month increase in U.S. house prices following a downwardly revised 0.2% decline in December.
The largest increase came in the South Atlantic region, reversing a sharp decline the month prior, where home prices were up 3.6%. In the East North Central region, prices were up 3.9%.
Only one region saw a decline in house prices - the Pacific, where prices were down 0.9%. House prices in the West South Central region were flat. On an annual basis, house prices are down 6.3% from January 2008.
But wait! Even in the Pacific (specifically California), where it did show a 0.9% decline, as far as our own neck o' the woods is concerned, in December, home sales jumped 55% in Santa Clarita and 78% in the San Fernando Valley.
When you're thinking, "Should I buy now or wait ?", you need to be aware that it's not just all about the home prices either. Unless you've got a bank account as fat as Brangelina's, if you're a first-time homebuyer, chances are, you need a little help in the down-payment-and-closing-costs department to close the deal.
I had clients who could have qualified to become homeowners back in 2008, and reap the tax benefits of homeownershi, but chose to wait. Well, here's just a few changes that happened while they were waiting:
- Those who didn't have enough down payment money could have availed of Down Payment Assistance Programs like Nehemiah, Ameridream and Cal-HFA before these went bye-bye in late 2008.
- The minimum down payment last year for an FHA loan was 3%. Today, it's 3.5%.
- Mortgage Insurance Premium last year cost 1.5% of the total loan amount upfront, and .5% every month. Today, it's 1.75% and .55%.
- Borrowers with scores below 580 still had a fighting chance to get an FHA loan last year. This year, most lenders are exercising their option of extending credit only to those with a credit score of 600 and above.
- Last year, someone whose debt-to-income ratios were over the 43% maximum for FHA loans could get an exception (even if their debt-to-income ratios were in the high 50's with compensating factors). This year, you'd be hard-pressed to find lenders giving exceptions to anyone who exceeds 50%.
Inspite of tightening lending guidelines, people are still buying homes because they know that the market's going to turn (It always has, and it always will.) What you buy for $250,000 now has a pretty good chance of earning a fair amount of equity over the next several years (when you buy at the lowest point in the market, and lock yourself into rates in the 4's and 5's, it's a no-brainer). John D. Rockefeller famously said, "The way to make money is to buy when blood is running in the streets." Unless you've been under a rock the last 18 months, the streets are stained crimson with short sales, foreclosures and sellers who are willing to bend over backwards on price negotiations.
My two-cents' worth is this: If you're thinking of selling in two years with the intent of making moolah, you either need to build yourself a time-travel pod and go back 2003 and stay there, or you need to put the crackpipe down. Odds are, you're going to end up with a loss. However, if you can afford to make the purchase now and you plan to be in the house for at least five years, buy now.
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