Wednesday, October 23, 2013

Bend Oregon Real Estate Tidbits: Is Now A Good Time To Buy? + Home Winterizing Tips | Ft. Aaron Lamb

Is It Smart To Buy A Home Now, Or Should I Wait A Few Months?

Potential home buyers, you have some serious decisions to make - and soon. As 2013 draws to a close, mortgage rates are steadily creeping up towards 5%, leaving you to wonder, should I buy now, or wait until later? The U.S. housing market is on its way to leaving the days of 3.5%, 30-year fixed-rate mortgages in the dust, due to the growing list of economic issues including inflation, consumer credit, and rising home prices, just to name a few. The threat of mortgage rates rising to 5% by the end of this year is merely just a paper cut compared to the fact that they could reach  5.5% or even 6% in 2014. Let's think of this in layman's terms: Buyer A snags a $300,000 fixed-rate, 30-year mortgage at a 5% interest rate, with the following payments:
  • Monthly payment = $1,610.46
  • Total payment = $579,569.69
  • Total interest = $279,769.69
Not too awful, right? Now take Buyer B who snares a $300,000 fixed-rate, 30-year mortgage, at a 6% interest rate. They'll end up paying the following:
  • Monthly payment = $1,798.46
  • Total payment = $647,515.44
  • Total interest = $347,515.44
Over the life of the loan, Buyer B will end up paying about $67,746 more for having a 6% mortgage rate as opposed to a 5% rate. According to Freddie Mac's weekly mortgage rate survey, current rates stand at 4.2%. Even though prices have declined within the last few weeks, the big picture shows a general rise in rates to between 4% and 4.5% before the end of 2013. This bubbles the age-old question to the surface for home buyers on the fence: Should you pick a side now, while rates are still fairly reasonable, or do you wait and risk having to deal with mortgage rates as high as 5% or 6% in 6-to-12 months? Some factors to consider: The Federal Reserve will stop "tapering": The Fed has embraced a policy of low interest rates primarily by buying up securities in the U.S. mortgage market, for the last five years, but all indications say the Fed will ease off on those purchases, thus driving interest rates up even further. "The days of rates in the 3% range are gone forever because the Fed will soon be pulling out of their mortgage backed securities purchasing program," said Tim Lucas, editor-in-chief of the mortgage website "When the Fed stops buying, demand for these securities will fall dramatically, and rates with jump back up to typical levels. Not only that, but once the unemployment rate nears 6.5%, the Fed could stop buying these securities, sending rates higher. We're at 7.3% unemployment now, with positive economic signs with every blink of an eye." Rates will likely rise - and soon: "The housing market has clearly been on the upturn in most areas. I think a year from now people will look back and realize that this was a prime buying opportunity," said Peter Grabel, a mortgage loan originator at Luxury Mortgage Corp. in Stamford, Conn. "Most people will agree, it is only a matter of time before rates hit 5%." The autumn buying season is very underrated: Mortgage and Real Estate professionals promote buying now, not only because rates and home prices are still reasonable, but because there is less competition in the residential real estate market compared to the busier spring and summer buying season, and the dedicated sellers leave their houses on the market through the winter. "Autumn can be the perfect season to buy a home, next to spring, however this year the economic atmosphere differs from recent years," explains J.D. Cowe, senior vice president at Georgia-based Southeast Mortgage. "During the past few years there had been a larger inventory of homes, and this year the opposite is true. We are expecting a housing shortage come winter. But, fall is still a great time to buy a home, as you can take advantage of year-end tax breaks and the fall weather makes it an ideal time to move." Home prices are on the rise: The longer you put off purchasing your new home in this real estate market, the more expensive your purchase price will likely be. This is in response to the U.S. home prices being on an upward trend. CoreLogic, an Irvine-Calif.-based data analysis firm, estimates that U.S. home prices have risen 12.4% from August 2012 to August 2013. However, the perfect time to buy your new home is when you're financially and emotionally ready for that obligation, which will likely be the biggest financial investment of your entire life. "Life events drive real estate decisions - the birth of a baby, looking for a better school, a loss - whether it be by death or divorce - a parent or family member moving in or out, illness, children going off to college, relocation due to work, unemployment, raise, bonus, or natural disaster - all the good planning on the buying side can wipe out the best decisions when someone has to sell in a 'bad' market," explained Diane Saatchi, a Long Island, N.Y., real estate broker. "My advice to buyers would be to buy when they need and can afford to, as timing rarely makes a difference in personal real estate." Read Realtor's article here.   Have you thought about winterizing your home? Click here for some prepping tips for the fall season.  
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