It's a buyer's market. So why are you NOT buying?

Real estate news has been mostly negative for months now, but every story mentions that we are in a "buyer's market". So why are buyers sitting on the sidelines?

Let me speak to the buyer in you and lets think this through. Confusion and fear seem to be the key reasons you are not buying.

You are being told by the news that this is your market, but then you hear horror stories about the subprime mortgage market disappearing. But, is that you? Chances are very good that you have not abused your credit, at least not beyond repair, so you are probably not a candidate for a subprime mortgage anyway. IF this is true, then all the subprime news is NOT your news - it belongs to the other guy. You are not a subprime buyer!

Your news is very good, because you have maintained your credit. Interest rates on most mortgages are still low. Here at the end of August, most lenders are offering 30 year loans between 6% and 6.5% for your good credit. And good credit can actually have a couple of small blemishes, but not serious or numerous blemishes. So, you should be in a great position to get a very reasonable mortgage, at a fixed rate (not those scary adjustable rates).

Here is some perspective on interest rates. If you wait for a "better" market, you likely will be paying 7% or more for the same money. On a $100,000 mortgage, a 1/2% rate increase raises a 30 year mortgage payment by $34 each month. That means the 1/2% more would cost you an additional $12,240 over the life of the loan. That alone is a good reason not to wait.

You may then say, "but the TV news says home prices are going to continue to drop, so I should wait." That may be right, home prices are in a downward correction pattern at present. But, how far down are they going to go? Many markets have already made their major adjustments, so you may only be looking at a 2-3% additional drop. if so, then on a $150,000 house, a 3% drop is $4500 more it MIGHT go down. Unless you have cash, interest rates will need to stay at present level while you wait or you will pay a lot more in interest than you saved by waiting. At some point in time home prices will start to go up again.

Your decision to buy now or wait is very personal, but don't let the "gloom and doom" news stories make that decision for you. There are so many advantages to being a homeowner such as deducting your mortgage interest at tax time, or being able to paint a room the color you want, or making your own rules instead of following a landlord's rules. But the one that always seems to come out when talking with a new homeowner is that their dream has come true. Most people still have a deep desire to own their dream home.

A wise, very rich investor has been quoted as saying "when other people get scared, I get excited and when others get excited I get scared." If this is good advice, then now is the time to buy when others are afraid of the market. I'm sure you have heard the investment advice that "the time to buy is when everyone else is selling." For most of you, a home will be the biggest investment you make. Right now sellers want to sell but there are very few buyers, so sellers are negotiating. However, sellers are not giving their homes away, so don't expect to "steal" a house, but there are really good deals in the market.

So why are you NOT buying?


Copyright 2007