Buyers - Should I Wait?

Wow! What an interesting market! And it's only going to continue to get more interesting. There's lots of talk about trying to jump start the economy using the housing market as the platform for recovery. One of the options being hinted at is a low (maybe 4 1/2%) mortgage interest rate for residential home purchases (not refinances).

So, if I'm a buyer do I wait to see if this program materializes? It all depends. Interest rates today hover between the mid 5%'s and the low 6%'s (conventional and FHA) - very attractive rates for recent history. If you're a first time home buyer you may not want to wait. Remember there is a $7,500 tax credit availble to first time buyers - but that is only available for a limited time (see an earlier post in this blog for more information on that credit). If immediate cash flow is important to you in purchasing a home, the value of the credit may be much higher to you than the lower monthly payment resulting from a lower interest rate.

Another factor to consider is the impact a reduced mortgage rate might have on the inventory of homes from which to choose and the price of that inventory. More buyers will be attracted to the market if a reduced rate is available. Inventories of homes available will decline as more homes are purchased. With fewer homes on the market and an increased amount of demand (more buyers) the price of homes should begin to increase - possibly offsetting the savings one might achieve at a lower interest rate down the road.

When is the right time? Each buyer's situation will drive the timing. A good source of help in assessing your situation is a local Realtor. Call one. They'll be glad to help you evaluate your opportunities.