After the long-awaited and highly anticipated 0.25% reduction in the federal funds rate reduction by the Federal Reserve, many realtors are being asked if now is a good time to enter the market.
Optimism is beginning to gain momentum because mortgage lending rates have been tapering down ever so slightly for the last few months.
The bellwether analysis from Freddie Mac says that in mid-September the average rate for a 30-year mortgage was now down to 6.3%.
Many agents feel that the game-changing moment will be when you can secure a mortgage for 6% or less. That’s also when prices will begin to head higher.
So, many smart buyers are starting to make their move now, capitalizing on the declining mortgage rate and their strong position to negotiate a good price.
Right now, I would not lock in a mortgage rate. Instead, I’d make plans to purchase based on two assumptions – 1. When loan costs fall further, I will benefit; and 2. Cheaper money means property prices will rise, and I will benefit from that trend if I’ve completed my transaction.
An added bonus is the fact that approximately one-fifth of sales are being made after owners have offered discounts, according to the National Association of Realtors (NAR).
These discounts are rarely more than 3%-5%, but they’re enough to get buyers to close.
As a buyer, you also have more choice than usual. The number of homes on the market has grown for 22 successive months. Right now, there are more than one million properties for sale.
Upsizers should note this trend because the strong supply has increased the average number of days it takes to strike a deal. The average selling time is now 31 days, according to the latest NAR data.
Below are five issues to consider before making your move. (And when you’re ready, I’d be delighted for the opportunity to assist you with your real estate needs).
Five-year plan – Have you thought through where you’re going to be and what you’d like to be doing in the next five years? It’s an important question because most Americans stay in their homes for five to seven years.
Income potential – Assessing your income is an important component in your buying strategy. If you’re buying for the first time, it’s likely you’ll believe your income will rise. For upsizers and downsizers, the equation might be different. Be honest with yourself on this point.
Debt load – How much debt are you able to take on or willing to carry? If you have a stable income, the general calculation is based on a debt-to-income ratio of 36%. This figure will probably determine how much you’ll be allowed to borrow.
Home equity – If you’re upsizing, talk to your lender about the equity in your loan. Basically, you want to measure the size of your debt against today’s value of your home.
Credit score – First-time buyers should investigate their current status as lenders will look carefully at the amount of debt you have taken on, and how you handle payments. A credit score of 700-plus puts you in an amazing position.