To Buy, Or Not To Buy – Is That Really The Question?

Foreclosures down, short sales
Sacramento housing market headed for a more normal pattern? In early 2013, Elk Grove saw a 45 percent gain in new-home permits and a 73 percent drop in foreclosures, while Roseville saw a 23 percent gain for new homes permits and 9 percent drop in foreclosure starts.

In case you haven’t heard, interest rates increased literally overnight and the market is set to take another turn in the next 12 months. However, interest rates are still at their lowest even with the recent increases. New construction will assist in increasing inventory and reducing prices – making home buying more affordable than ever.

To put it in better perspective for you, in 1981 the average home price was $82,500 with a 16.63% interest rate equaling a mortgage payment of $1,147/mo. In 2011, the average home price was $242,300 at 4% interest and a monthly mortgage payment of $1,093. $1,147 in 1981 is equal to $2,838 today.

So what am I saying? Take the time to position yourself to be in the drivers seat of your home purchase. If you go in as a desperate buyer where your lender has to “fix” a few things, and the file is touch and go (and very stressful for you), you will end up with a higher interest rate, and you miss the opportunity to learn to be a good steward of your finances before walking into the largest purchase you might ever make in your life. Moving too soon, you could also be setting yourself up to default on your loan in the future.

Take the time to be a stronger buyer – history shows the market gets better with time.

Who’s Market Is It Anyway – Buyer Beware

Elk Grove Short Sales
Sellers Market

What once was a predictable pattern, real estate market conditions now seem to change about as often as Daylight Savings Time and are about as unpredictable as the Spring to Summer weather transition – hot one day, rainfall the next.

Add to this mix, low inventory, a surplus of buyers, slowly increasing interest rates, and frantic “buy now”, “sell now” mixed messages from the media and we will work ourselves right up to a quiet storm where the people do nothing. No buying, no selling, just waiting, watching, and analyzing. Over analysis paralysis will soon be the “weather” of the day if we don’t use good old common sense.

In this article, I’d like to address the buyer. A few tips to help you come out of analysis paralysis and be able to take advantage of today’s market, now:

1. Save up at least 5% of the purchase price to be competitive in this current market. Down Payment Assistant programs are great, but they work even better if you come in with some skin in the game. 100% financing programs don’t work very well in this market.

2. If you qualify at $200K, look for homes at $150K. Why, so that you can have somewhere to go if you get into a multiple counter situation (which will most likely occur). You can then be a true contender and increase your offer when needed.

3. Understand the order of preferred financing in this current market – This is a seller’s market so VA loans are “low man on the totem pole”, next FHA, then Conventional, and finally Cash is King! The more “risk” you have (cash), the better your ability to negotiate an acceptable offer.

4. A hard working, full-time agent who is proactive and follows up on every offer made, asks why yours did not get accepted, and what could you have done to be an offer which gets accepted.

5. Be committed to that agent. Need I say more?

Advice to the seller, coming next.

My best to all of you soon to be homeowners out there and to the agents making it happen for you!