Mortgage Market Advice
My name is Rachel McGuire and I work for Lonestarfinancing.com. I have recently taken the helm of Loanbark and will be blogging here now along with other mortgage brokers.
Since so much time has passed since the last post, let’s get down to business and discuss the market. What market you say? Exactly! People come strutting into my office asking me to time the market for them. Here is the deal; I can time the market just about as good as the next guy. No one really knows what is going to happen but I will give you my take on the whole situation and you can do with it what you will.
In the early 2008 year, I think the economy will continue in the direction of a recession. With this said, the housing market will continue to decline. In an effort to jump-start the economy out of this recession, I believe the Fed’s will drop interest rates.
On that note, this will be a great opportunity to refinance. Many experts agree that if you can lock into a fixed rate at about 2% lower than your current rate, go for it. Keep in mind that a refinance can bring unexpected closing cost that you need to be prepared for. But in my opinion you will save money in the end. I’m a big advocate of fixed rate mortgages.
Now I want to bring up the dreaded question of: Should I buy a house now or should I wait? Here is what I think; buy it now! If you plan on buying a new home, plan on being in that home for a few years, and can qualify for that new home without over extending yourself, then I think you should do it. Many brokers don’t agree saying that you could lose a lot of money. For instance, if you put 30% down on your home and the housing market falls 15%, you have lost half your investment. Yes, this is true, but if you plan on staying in your home for a few years, you can wait out this down turn. If you are scarred of this happening, offer 10% - 15% below asking price to compensate for any lose you feel you may consume. It is important to remember that the market is constantly fluctuating and today your house may be worth a little less than it did yesterday or vice-versa.
These days’ homes on average tend to be on the market for a longer period of time. This is a huge advantage to the buyer in that the seller will often consider your offer and most likely counter do to the fact that their home has been sitting on the market for some time now and they are ready to move it. This creates a situation in which the buyer and seller end up with a deal that makes them both happy.
Like I mentioned earlier if you are buying a house in the market today, you are probably going to get an remarkable deal on the house and in the future, the home will increase in value as the market goes back up.
I can’t tell you what the market is going to do or if you should buy a new home today or tomorrow. A good deal to one person is not necessarily a good deal to the next. Everyone has their own opinion of GOOD and if you feel you have a GOOD deal, run with it. In the end you are the one who has to be happy and I can’t tell you what you want to hear to make yourself happy.
Tags: mortgage brokers
February 1st, 2008 at 1:30 am
Could I ask a mortgage question about he opportunities to buy at distressed prices? Ideas rehashed from the CBS news special house of cards about borowers thinking about walking away from severely underwater mortgages..…
I was fascinated by seeing recent talk by “calculated risk” (is it a “bubble blog”?) of the game contemplated by people walking away from mortgages. After walking away from a mortgage your credit is trash, ad I guess most of these unfortunate people move into apts. But I’d like to ask- what if you move into a less expensive house that you bought shortly before you stopped paying the mortgage on your expensive underwater house? Could a national game of Musical houses may be next?
That’s where you walk away from one overpriced house after you buy and move into a foreclosed (or REO) property nearby for a lot less $$. Then your neighbor can move into your foreclosed house doing the same thing, and so on …
When the music stops playing everyone who actually wants to live there has moved a short distance into a probably comparable house at a fraction of their former house price / payment.
In the past apparently opportunities arose to do this in ‘mill towns’ or ‘company towns’ when a major negative employment event occurred causing housing prices & demand to drop. and occur they did! Within the span of a few years everyone shuffled into similar houses at a fraction of hte previous price.
If you have a job, plan on staying, and are not generally dependent on credit scores to finance cars, etc. then it may be worth the potentially enormous savings if you have a large non-recourse underwater mortgage. I guess you have to purchase the second home (at like 50% off) with a good down payment (cash) prior to walking from the first. I don’t know how this can be pulled off (the details) but it has happened so i’m told. Like a game of musical chairs.
Anybody know if there will be opportunity for home-debtors to do this again in steeply-depressed priced markets? (040% declines) I have excellent credit and a good down payment! But my house has declined in value tremendously due to foreclosures in the neighborhood.
Thanks, Dr. Russ E the rocket scientist
February 12th, 2008 at 4:11 pm
Hello Dr. Russ, you ask a very interesting question. I happend to see the episode you are referring to on CBS.
What you are referring to might make sense for people that live in a town that lost it’s one and only major employer, and there are no hopes of improvement in home values over the next 7 or more years. I might add that it only makes sense if the values of property have fallen at least 40%, and you don’t mind taking a hit on your credit, and you are able to get into another house before walking away.
However, for those that live in nice areas along the California or Florida coast that still have a decent economy, I don’t recommend it. When we buy homes, we are buying an asset for the long-term. Variability in price is expected. Unlike a stock in the stock market where a company can actually go bankrupt and go out of business, and an investor can loose their entire investment, homes and land will always be in demand, especially in California and Florida. The values of most homes will be back up in a few years. If it were me, I would ride it out. Foreclosing and then buying in the same neighborhood only exacerbates the issue.
If someone simply can’t pay their home mortgage, then that’s another story altogether.
Mike
February 16th, 2008 at 5:38 am
i like your articles. It is very interesting . Because now i got clear idea about mortgage brokers.
March 19th, 2008 at 11:28 am
I think the most important step is to be realistic in what you can and cannot do. I’ve seen so many first time home buyers jump into something they cannot afford only because they have big dreams.