Why Buy Now?

Aha, the magic question.  Why should you buy now?  I know this may seem a little biased considering my profession, but let me show you a few things that are happening, and are about to happen, in the lending world.

1) 30 Year Mortgage. You can get a 30 year mortgage today with as little as 3% down.

2) Appreciation. According to the Macro Market Home Pricing Survey home prices are expected to appreciate starting in 2012, by 1.29%.

3) Interest Rates. Rates are on an increasing trend, and are expected to hit above 5% by the summer.  In November, 2010, rates were at 4.17%, today they are at 4.86%.  This small increase will cost you more money each month on a house that is priced the same.  Example: a $100,000 loan at 4.17% = $487.27/mo versus a $100,000 loan at 4.86% = $528.30/mo, a difference of $41.03/mo.  Yearly this difference adds up to $492.36 and over 30 years this adds up to $14,770.80.  If only you had bought in November instead of trying to chase down prices.

4) QRM. Quality Residential Mortgage– this is something you will start to hear more of in the future and it isn’t pretty.  The QRM will address 4 main issues: 1) they type of mortgage 2) The ratios between a purchaser’s income and their payment/overall debt 3) The amount of down payment which should be required (20% is being proposed) 4) The minimum FICO score for a borrower.  To give you an idea of the severity of these proposals, for the average mortgage written in 1997 (well before the housing mess), only 20.4% would have qualified for these current suggested QRM requirements. As mortgage underwriting has become much more stringent in the past three years, for mortgages written in 2009, only 30.5% (less than a 1/3) would qualify as QRM.  Here in the Bay Area this will be extremely problematic because of the high cost of housing.  Again, another reason that NOW is the time to buy.

5) Best Long Term Investment. Renters have only a fraction of the net worth that home owners do.  Real Estate has proven time and time again to be the best long term investment for your money.

Sounds like a good reason to me to buy now.