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How To Move Those Buyers Off The Fence

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  • How To Move Those Buyers Off The Fence

    We debate it on the air pretty much every day: What will it take to get potential home buyers off the fence and into a home? Is it a tax credit? Lower interest rates? A real bottom in home prices? The official mandatory silencing of all real estate reporters??

    The National Association of Home Builders, clearly needing to know more than most of us, did a survey of 700 self-described “on-the-fence” buyers, according to an article in the Washington Post. “Asked why they hadn’t committed to a purchase, 44 percent said they’re holding out for lower mortgage rates, 41 percent said they weren’t sure they could qualify for financing, and 38 percent said they expect to see lower house prices.”

    Now I realize that doesn’t add up to 100 percent, so I’m guessing the respondents were allowed to give several answers to that same question. I apologize, I couldn’t get a copy of the study, as I was told that it was “proprietary.”

    I’m guessing the Builders, whose research subsidiary did the study, is disappointed at the findings, given that they are pushing hard on Capitol Hill for a home buyer tax credit. They want a 10 percent credit capped at $22,000, but the study found that a tax credit ranked only 6th on the list of top ten incentives to buy a home.

    The home builders are also pushing for a mortgage rate buy-down, government-funded of course, to 2.99 percent for the first six months of this year and 3.99 percent for the second—both on 30 year fixed. Better news there, as the study found the mortgage rate consumers thought would be most effective would be a 3 percent fixed-rate loan. Congressional Republicans are pushing for a 4.5 percent government-funded interest rate, so I guess lawmakers may need to rethink that one a bit.

    But then that pesky study throws yet another wrench into even a low, low interest rate. Remember, 41 percent of those polled said they weren’t sure they could qualify for a mortgage. That, unfortunately, is the trouble with a lot of the so-called “fixes” out there today, be it a refi or a loan modification or even a new loan for a new home purchase. In order to take advantage of the low rates out there, you need to have great credit, and you need to be applying for a conforming loan ($417,000 or lower).

    I know, I know, what about that new conforming loan limit up to $625,000 in some more pricey markets? Sorry folks, ask any mortgage broker, and they’ll tell you that you will get a far lower interest rate on the old-fashioned conforming loan limit. Don’t even get me started on jumbos.

    Oh, and the builders also found that all those free upgrades, like the fancy built-ins and the granite, and even the “green” features and certifications, aren’t all that enticing to today’s potential buyers. Suffice it to say, these folks are not exactly teetering on the fence, they’re stuck on it.



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  • #2
    well as a self described fence sitter myself

    i don't care about mortgage rates

    i don't care about qualifying for a loan

    but i very much care about "a real bottom in house prices"

    i look at the graphs showing average wages vs. average home prices and i can't see why prices can't fall 30% from peaks

    so if i see i place i really like and it is 20% under CV then i'm interested

    but most places are still being marketed at over CV and sold for around 5-10% under

    and so i sit, window shopping on the biggest purchase of my life

    at least it's a pretty interesting new hobby
    have you defeated them?
    your demons


    • #3
      The solution for some fence sitters may be to lease with an option to buy. If prices continue to fall they can move.


      • #4
        it is interesting to see your expectation, which is probably that of many others lured into believing that everything is collapsing in price.
        As you have found, the reality is not what the press would have you believe.

        It depends what you are buying a place for - to live or as a rental.
        They will have different criteria and also will have different drops in value.

        If the numbers stack up for a rental now, why would you not go ahead with something now ? Or are you being greedy and trying to pick the bottom ?

        If you want a place to live, again, if the numbers make it affordable now, it's value becomes irrelevant once you have it. Why take the risk of trying to pick the bottom. You won't know it is the bottom until it is already on its way back up again.

        There are some bargains around from distressed vendors, but as you have found, the rest of the market is just holding on where it was, & lower interest rates make that easier to do.

        If you are cashed up, you have a lot of bargaining power right now.
        Wait for the rise & that power disappears.


        • #5
          those waiting for the bottom will only find it once its past history... sure things could drop further (prices and int rates) but if a deal makes sense now, take it.

          Once we hit bottom i understand things are expected to move quickly upwards due to inflation across the board.

          I also reiterate, lower priced housing is already less than cost, so it ain't gonna drop unless councils miraculously abolish their fee structures!~
          two ears and just one mouth.. for good reason.


          • #6
            if i buy a gold, i'm not necessarily going to make a bracelet

            if i buy shares in BHP, it doesn't mean i'm interested in having a ton of iron ore delivered to my door

            you may have noticed that the price of gold and shares goes up and down quite a bit

            i have found it to be quite a good idea to buy at what i think is the bottom of the cycle, i never need to buy, so mistaking the bottom of the market means my money just sits in the bank

            however if i do buy, and decide not to keep, i try to sell on a good healthy rising market, always leave some profit for the next buyer, try not to be greedy

            so i guess we have different definitions of greed

            i consider greed to be trying to have more than you can afford, trying to hold on to too much if you like

            i don't considered it greedy to try and buy something cheaply

            it's like buying things from a 2nd hand shop, hardly greedy, just economical

            imagine going to buy an airline ticket and the travel agent calling you greedy because you won't fly 1st class

            most of us buy discount airline tickets in advance (not you terry) instead of just driving to the airport and buying a full price ticket on the next flight at full whack from the air new zealand counter

            if i needed a house and waited too long to buy, missed the bottom and then had to pay a lot more, that could probably be called greedy

            but just waiting for 1 of many investment options to bottom out before moving in

            that's just smart
            have you defeated them?
            your demons


            • #7
              If you're buying a home solely for the investment value, you should wait until prices hit the bottom. If you know when that is, I'm sure there is something I can sell short to capitalize.
              Even Warren Buffett admits he doesn't know what the lowest price is on the stuff he buys.
              In Southern California many homes can be purchased with payments lower than rent, so throwing out all the "tax breaks" and thoughts of appreciation, why would you pay more to rent something when you could own it cheaper and have some upside?
              Speculation on values was what helped create this mess in the US and people bought homes for just the investment value. Waiting for the bottom of the market is still speculation and some folks will win, others will lose.
              Buy a home if want something that's yours and you plan on holding it for a few years, if you are looking at just the investment value, wait. Maybe you are clairovoyant?


              • #8
                day by day the bad news rolls in

                obama is trying to stop the senate attaching trade protection measures to the bail out plan as that's what turned the 1929 stock crash into a world wide depression lasting 10 years! may have lasted longer but we were saved? by ww2

                gordon brown said the world was in depression the other day and is furiously back peddling now


                usually optimistic yardley in australia has come back from holiday in europe and has suddenly started backing away from his 2008 advice

                the reserve bank gov of nz says the bottom isn't here yet and the market could be depressed for many years

                nz unemployment makes surprise jump to a 5 year high


                the stockmarket, which usually leads the general economy by 6months, is still doing it's stunned mullet impression....

                clairvoyance doesn't come into it
                have you defeated them?
                your demons


                • #9
                  stunned mullet? I love it
                  Obviously we are all going to experience more pain.
                  If the investment value is your consideration, you should wait.
                  Owning a home is more than investment, if it weren't everyone would be letting their house go.


                  • #10
                    You could equally argue that owning a Ferrari is more than an investment.


                    • #11
                      Originally posted by Green Fish View Post
                      You could equally argue that owning a Ferrari is more than an investment.
                      Owning a Ferrari is definitely not a financial investment. You are buying a toy to get enjoyment out of.


                      • #12
                        ditto a person earning $15 an hour owning the house they live in. There is no difference, except that the money to buy the toy was borrowed.

                        The root cause of the current problems is the bent bankers who lent the money to these cretins - and Clinton, who encouraged it.