Mortgage rates & wwyd

[Logan's Mom]

I pretty feel that we may be near the end of the downturn in housing but also there will be a very slow recovery.

I don't have a handle on what interest rates would look like in the next year.

Basically I'm contemplating on purchasing a home but haven't decided if we should do it now or sign another year lease.

What are your thoughts?

[A&A]

Originally Posted by Logan's Mom

I pretty feel that we may be near the end of the downturn in housing but also there will be a very slow recovery.

Housing prices will probably fall for another two years:

http://www.newsdaily.com/stories/l19...group-housing/

[velochic]

I think we are a long way from the housing bottom. I think we are at least 5 years away from having homes appreciate at *normal* rates. Mortgage rates are going to be a trickle down affect from what the Fed does.

[SleeplessMommy]

It may depend on where you live.

Can you get a house for total payment less than rent?

If I was buying today, I would want to get a very good deal. You can research your area on zillow.

[p.s]

nationally, i think the overall picture will continue to worsen. All real estate is local though (which would you rather inherit mortgage free- a condo in Manhattan or a condo in Cleveland), so it depends on your area. Some areas did not over bubble ( a la Las vegas), have nadir'ed the decline in prices, and b/c of the local industries, demand exceeds supply so that prices still are increasing ( at least with inflation if not higher).
So just depends where you live.
If you divulge that, I'm sure you'll get lots more opinion.

[ellemoon]

Everything I have read says that there will likely be more falling with a recovery maybe 2012. I think it is tricky now though, because it is likely to be harder to get a mortage as the credit crisis worsens. No real advice, but there are lots of things to think about. Where do you live? What have prices been doing there?

elle

[Logan's Mom]

I live in New England, more specifically MA and in the Metrowest.

We are considering either staying where we are at: Grafton, Sutton and Millbury in that order.

Or we may move closer to DHs work: Franklin, Wrentham, and Bellingham area. We heard the schools in Franklin are very good.

I really wonder what people think the mortgage rates will do. Should we lock in and buy now even if housing might lower some? I mean if mortgage rates go up then I could end up paying more for the house in the long run even if the market correct another 10% or so right????

I'm not sure, its such a HUGE decision and I don't have the knowledge base to make decisions. I'm going to guess if I talk to a real estate agent they are going to say buy now (they work on comission). I'm going to guess that the same goes for a mortgage broker.

So, I'm looking to hear what you experienced mama's and papa's out there think, have experience, and know.

We pay $1520 for rent, an extra $100 for going month to month (while we figure out if we want to resign our lease -- was in a position where my company was doing layoffs but found out I'm ok -- YEAH!) and storage is $75 per month. A mortgage would be more then that including taxes and home owners. We are thinking around $350k for a home. Then we would have to pay for heating, etc. which we don't pay for now. So, owning a home would cost us more then renting at this point. However, there would be a tax break. I guess we wouldn't be building equity if the market falls or stagnet -- right???

[p.s]

Originally Posted by Logan's Mom

I live in New England, more specifically MA and in the Metrowest.

aha.... well in that case, I would wait (non financial expert speaking here). Not an expert in anything (just to clarify), but we also live in New England and travel alot to Boston. More based on what I've read about the Boston area real estate and what I see in NE travelling around, I would wait. I'm a nut and collect all the RE and rental flyers of everywhere we go and flip through them.
Bottom price would be the most important factor for us, b/c we don't wait the duration of a mortgage to pay it off.

It is a huge decision. Probably one of the biggest financial decisions you make (not unlike choosing who you marry), but in another sense: no. And the reason I say no is, b/c you have to pay to live someplace regardless if you rent or buy. Or even if someone lives with their parents, then you have to spend alot of energy making sure the parents are happy.

Most RE experts agree that if you 'plan' on staying someplace 7y or more, that is is worthwhile to buy (provided you can safely afford). The only problem is most families do not actually stay in the same home for 7y or more. I think the stats are something more like 3 y.

So then it becomes a matter of recouping closing costs. Though I would guess that if you were absolutely not moving for 7-10 y, now would not necessarily be a bad time to buy. Just probably not at the lowest point in the foreseeable future, kwim?

There are a bunch of different metrics to determine if it is more cost effective to rent or buy (like buy to rent ratios). A quickie one that landlords or investors use is the 1: 20 rule. As in annual realized rent x 20 should be approx the property price. markets tend to over time revert to this mean. You want to buy when you're on the downside of that, and sell on the upside. And in the meanwhile collect rent. This is also useful to determine when someone as a renter might want to consider buying. If you really really want a bargain, i would get to know some local real estate investors (I would guess most people would have at least 1 in your circle of acquaintances) and ask their opinions (if they are not of the losing money type). Also, you can join some financial forums and get more local RE info. there are also landlording forums out there.

b/c honestly, if I lived in MA, I wouldn't care what someone 3,000 or 6,000 mi away thought about RE. Where we live right now, the market is similar to MA, and I think "wait." Where our home is, many many miles away, it is a huge metropolitan area with industries still growing or moving in. When the RE slump first hit, houses sat on the market, maybe dipped less than 5%, and have been climbing for over a year. This is b/c demand still exceeds supply. Hmmm.... have you considered posting on the finding your tribe forum for MA? like ask...what's the RE market like for you? Or job situation.

[p.s]

Originally Posted by Logan's Mom

However, there would be a tax break. I guess we wouldn't be building equity if the market falls or stagnet -- right???

firstly, i really hate that expression tax break. b/c you have to pay so much in interest to get a little measley back in tax credit. whoopee. Also, in general, housing is not the greatest way to build equity. Though for some people who have would otherwise spend all their money, then yes, buying a house can be a sort of "forced" method of savings.

[CameronsMama]

If you want to buy a house and you are ready emotionally to make that commitment, and you can afford it, and you are ready to settle down in one location for an extended period of time, then I would go ahead and buy a house. If interest rates get substantially better down the road, you can refi. If you are thinking about buying a house because now might be a good time to invest, or you are considering "buying into" the market while it is low, then you should probably hold off for now.

The truth is, really, there is no way to know for sure what the market will do, so buying based on what you think/hope will happen is not a good strategy. That's not to say a house isn't a good investment, because you will likely build equity, it's just a question of how quickly, and you may lose some before you start gaining especially in the current market.

[nd_deadhead]

Mortgage rates have been low for years - so long that many people don't even remember a 10% mortgage (I had one, 18 years ago). I can't see mortgage rates going much lower than they are right now - they can only go down so far! But eventually they will go back up again, and if you have a fixed-rate mortgage, you're laughing. From an interest rate standoint, this is a good time to buy.

So the question becomes "Do I buy a house now, or wait to see if prices will drop?" Only you can answer that question, because it all depends on what you want. It doesn't sound like you are looking at a specific house, or even a specific neighborhood. Any house can go for a "good" price, depending on the motivations of the seller. Since you are on a month-to-month lease, I would start looking at houses, and if you find something that meets your needs and fits your budget (remembering to factor in the cost of property taxes, insurance, utilities, and upkeep), go ahead and buy.

At an interest rate of 6% for 30 years, the payment on $200,000 is $1200.

[Aufilia]

Are you in a good financial position to buy a house now? I think that's a much more important question than what the market is doing. It's more important to ask yourself if you're ready: Can you afford a mortgage (whatever is normal in your area) + taxes + insurance on a house, as well as house upkeep, on a monthly basis? Do you have cash for the down payment and closing costs, if there are any? Do you have a savings cushion to keep your mortgage payments up in case you should lose your income due to the economy or whatnot?

If you can say yes to all those things, then maybe you should buy a house now. If not, then you should probably wait. I don't think what the market is doing now is too important. What the house prices will be in 3-5 years is ONLY important if you're planning to sell again within that time frame. If you're in a house for the long term, then it doesn't matter if there's a bit of continued price drop before prices go up again because the value of your house is all theoretical anyhow until you sell.

[Ironica]

You didn't specify if you are planning to *finance* $350k or put down 10-20% on a house with a pricetag of $350k, but I'll give you some comparisons:

30-year fixed loan...
At 6%:

350k principal: $755,434.80 repayment total
300k principal: $647,514.00 repayment total

At 6.5%:
350k: $796,406.44
300k: $682,632.00

8%:
350k: $924,544.80
300k: $792,464.40

(I just went to mortgage-calc.com and plugged in numbers, then multiplied them by 360 to get the totals.)

As you can see... a loan for $300k at 8% is cheaper than a loan for $350k at 6.5%. So whether it's better to buy now or wait depends on what you seriously expect your real estate market to do, as well as interest rates.

Me, I expect interest rates will start climbing pretty soon, just as they did in the 70s and 80s when we had some pretty similar economic conditions. They've already edged up a bit, but prices are climbing and inflation will start going up soon too, which means the interest rates have to go higher. (And as much economics as I've studied, I still don't quite get *why*.)

So you might play with the numbers, and watch the interest rates, and set a rate at which you'll go lock in a loan. Then that might be a year from now or three months from now, depending.