Writing Example: Why Now is the Time to Buy

Market Update: More Proof - Now is the time to Buy or Refinance (Written February 2013)

Mortgage Rates are on the Rise!

Freddie Mac’s weekly mortgage rate survey reported last week’s 30-year fixed rate nationwide average at 3.35%, which is one quarter-percent point higher than the all-time low that happened last November.

Mortgage Bankers Association predicts in its annual rate forecast that the 30-year fixed will increase to 4.40% in 2013 (more than a full percentage point higher than January of this year). This high increase would suppress homebuyers’ purchasing power.

Example of the extremity of rates reaching 4.40%:

Buying home in the Bay Area (California) with a jumbo loan limit of $625,500

2012: at 3.32% - the mortgage payment would be $2,751
2013: at 4.40% - the mortgage payment would be $3,132. This would be a increase of $381 - a 12.4% decrease in purchasing power.

This high escalation in mortgage rates may also conclude the longest Refinance Boom in recent history. However, the demand for HARP (Home Affordable Refinance Program) refinances is still going strong. These government mortgages closed 1 in 4 refinances in the Q3 of 2012. HARP is currently on its second installment and is expected to help over 1 million owners in 2013 with their homes. Mortgage rates are known to rise suddenly and unexpectedly, though, so trying to refinance early in the year seems to be the safest move.

Home Prices Rising

The National Association of Realtors released on Monday that the national existing single-family home price median increased 10.0% in 4Q, the strongest increase since the 4Q in 2005. Those houses currently or soon to be on the market are going to be higher in price because they are higher quality (purchased more than 7 years ago). The monthly list price per square foot also increased $4 in January from $169 that was December's price. Last January, the square foot price was $155.

Inventory is Low and Decreasing

January inventory dropped from December, to the lowest point in 3 years, which conflicts with the housing market's seasonal norm. California has taken the top 7 cities of highest inventory drops. Right now, there is around 88,000 listed home on the MLS system which is a 47% decrease from September 2010's peak and 19% from January of last year. There are many reasons why inventory is low when the market seems like its been on such a high; the main reason being the mortgage financial crisis that hit this country not so long ago. Typically, home owners sell their houses and look for a new place within 5-7 years of their original purchase. This means, buyers of 2006-2008 in a normal sense would be putting their homes on the market. However, these owners are still trying to get back the money they invested in their house. Banks are also keeping their foreclosures off of the market, because they want the highest sale they can get.

Why is this all going to be the hardest on First Time Buyers? With inventory low, the only houses being put on the market are of high quality and high price. First Timers also usually cannot beat the current low, long-term fixed rates. This means Investors have the power because they have cash, so an increase in rates or house prices. However, this is not to discourage new home buyers. While it may take more effort to find the right house, now is the perfect time for those looking to buy for their first time. Rates are still extraordinarily low and home prices are just freshly increasing. Finding the right agent and mortgage lender will help in process while finding you the best deal.

More Current Industry News

Top Ten Metro Cities with Major Inventory Decreases*

1. Sacramento - 75.11%

2. Oakland - 66.77%

3. San Francisco - 61.41%

4. Long Beach - 56.19%

5. San Diego - 49.34%

6. Los Angeles - 48.68%

7. Fresno - 47.62%

8. Portland - 43.18%

9. Denver - 39.02%

10. Houston - 35.02%

* From Movato.com