Common Housing Market Questions-President's message
Common Housing Market Questions
President’s Message
Chris Sloan
As we near the end of 2009, we
find that housing markets nationally and locally are in much better shape than
they were last year at this time. The combination of low home prices, bargain
mortgage rates and government tax incentives has created a momentum and demand
for homes that is likely to continue into next year and hopefully break the
cycle of bad news.
If you’re thinking about
buying a home in the next few months, you’re likely to have a lot of
questions about home buying and current market conditions. Here are answers to
some common inquiries:
When will the housing market recover?
We’re already seeing some signs of recovery for
housing. On both a national and a state level, sales appear to be on the way
up. In Utah, third quarter home sales were up 2 percent compared to the same
period a year before, the first quarterly rise since second quarter 2006.
Experts have mixed opinions, however, about the
direction of home values next year. Lawrence Yun, chief economist of the
National Association of Realtors, believes U.S. home prices will get a 3-5
percent boost, while Mark Zandi, chief economist and co-founder of
Moody’s Economy.com, believes prices will see more declines as new
foreclosures come on the market.
The fact is there is no consensus on when the bottom
will be and no home buyer will be able to time it perfectly. Buyers should be
aware that price drops or gains will vary significantly depending on the
location and the price of homes. In fact, some homes (like lower-end homes or
houses in prime locations) have likely already seen their values stabilize.
Is it a good time to buy a home?
Yes, it’s a good time to buy a home depending on
your circumstances. If you have a stable job, steady income, good credit and
are planning to stay in the house for at least four or five years, then a home
purchase may be a wise decision.
Today’s home buyers have tremendous advantages.
In many areas, home prices have come down from their peaks and are incredibly
affordable when you take into account the super-low mortgage interest
rates.“The market is just about as affordable as it’s ever been at
least based on incomes,” Zandi told attendees at a National Association
of Home Builders conference.
The federal government’s home buyer tax credit
is also a significant incentive. It’s worth up to $8,000 for first-time
buyers and $6,500 for existing homeowners who have lived in their homes at
least five consecutive years out of the past eight.
While consumers shouldn’t rush to make a home
purchase if they are unprepared for the financial commitment, buyers who are
ready to get into the market shouldn’t procrastinate too long. The
extended tax credit ends April 30, and experts expect interest rates will begin
to rise next year.
How do I know my local market is improving?
One
of the best indicators for knowing which way the market is headed is to look at
the supply of inventory. In other words, how many months it takes to sell the
current inventory at the current sales pace.
Generally speaking, this is about 6 months in a
balanced market. On a national level,
Yun reports that it would take about 6 months to sell the current supply of
inventory for homes less than $250,000, but it would take about 14 months for
homes priced higher than $500,000. To get a better gauge on your own market and
price range, talk to a local Realtor about whether inventory is trending up or
down.
What happens if home prices fall after I buy?
As long as you can afford your
mortgage payments and don’t need to move anytime soon, a dip in prices
probably won’t affect you too much. It could have an effect on your
ability to refinance, but with today’s super-low rates you likely
wouldn’t be able to refinance to a significantly lower rate.
Also keep in mind that homeownership is a long-term
commitment, and home values tend to rise over the long run. For example, data
from the National Association of Realtors show that home values tend to rise at
the general rate of inflation plus 1.7 percentage points in a balanced market.
That means homeownership is usually a pretty safe bet for those who are in it
for the long haul.
Nevertheless, it’s important that you not
overpay for your home. Before you make an offer on a property, make sure to
talk to your Realtor to make sure the price you’re paying is in line with
current market values. Also talk to your Realtor about any concerns you have
about the home-buying process and ask for information about local market
conditions.
For more information on the home-buying process, visit
UtahRealtors.com or Realtor.com.