Thursday, October 27, 2011

Bargains Abound: What Are Buyers Waiting For?

With low home prices and ultra-low interest rates, the housing market is offering “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek.


Since the housing boom of 2006, home prices have fallen about 31 percent. Also, mortgage rates have been hovering at record lows for the past few weeks (4 percent range or even lower on 30-year fixed-rate mortgages, according to Freddie Mac’s mortgage market survey).

“It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says economist Dean Baker. “Prices may go lower, but not by much.”

The article notes the following scenario: Buying a $300,000 home with a 4 percent mortgage rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012 but mortgage rates will increase by a half-point. So for that same loan under that scenario, a home would sell for $289,000 while the monthly mortgage bill would be $1,171--only a $26 difference.

For those who can qualify for a mortgage, "playing the waiting game" won't result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek.

Source: “Crazy Home Deals Await the Creditworthy,” Bloomberg Businessweek (Oct. 24, 2011)

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