Home ownership benefits individuals and families, strengthens our community, and is vital to our economy. Despite current economic challenges, most Americans still aspire to the dream of home ownership. Last year, the market had already seen a gradual stabilization of sales and prices. Default notices have dropped 20 percent from 2009 to 2010, indicating that this foreclosure cycle could peak in 2011 as lenders finally are able to clear the backlog of distressed loans that have occurred in the last five years.
Home ownership didn’t create the foreclosure crisis; Wall Street greed and irresponsible lending practices did, but the fact still remains that owning a home is one of the best ways to build long-term wealth. The ability to deduct the interest paid on a mortgage can equate to significant savings at tax time despite current economic challenges. An example would be a family who bought a home this year with a $200,000, 30 year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file next year.
Low interest rates mean real money for today’s home buyers. Buyers who purchased a median-priced home five years ago with an FHA loan requiring 3 percent down payment would have a monthly mortgage payment of $1,650. With today’s interest rates, that same buyer would pay $1,150 per month—that’s a $500 per month savings; $6,500 per year.
Although the market has changed dramatically in the last five years, this is one of the best times to purchase your dream property. With so many “deals” out there and such low interest rates, the time has never been better and timing is everything, especially in the real estate market.
Casey
February 15, 2011
I agree that the banks should have behaved in a responsible manor, however, it doesn’t let the borrowers completely off the hook. They all signed contracts to make payments at the agreed levels. Everyone must take a personal responsibility to uphold ones commitment. For every borrower that lost their job, or had un-expected difficulties, there was also a flipper or dead beat borrower that stopped making payments prematurely.
If this the best time to buy, that remains the be seen. I remember in 2006 when it was a great time to buy as well.
Borrowers today should be wary of low interest rates. They are a double edge sword, since once signed, they will likely never be able to refinance their mortgage. The risk buying now is that if interest rates rise in the future, it will surely lower the current market rates.
Casey
February 15, 2011
I agree that the banks should have behaved in a responsible manor, however, it doesn’t let the borrowers completely off the hook. They all signed contracts to make payments at the agreed levels. Everyone must take a personal responsibility to uphold ones commitment. For every borrower that lost their job, or had un-expected difficulties, there was also a flipper or dead beat borrower that stopped making payments prematurely.
If this the best time to buy, that remains the be seen. I remember in 2006 when it was a great time to buy as well.
Borrowers today should be wary of low interest rates. They are a double edge sword, since once signed, they will likely never be able to refinance their mortgage. The risk buying now is that if interest rates rise in the future, it will surely lower the current market rates.
Kathy Awai, R(S); ABR
February 16, 2011
Casey, I agree that there were a lot of irresponsible borrowers as well and that included the flippers, however, many of these first time borrowers I believe were not guided properly as to the consequences of their arm loans escalating. I, as a Realtor, always emphasized to my clients the risk of an arm loan, especially with first time buyers. As far as a great time to buy, it is and I’m not sure why you would want to re-finance on an interest rate that is historically low and it is not necessarily true that they could not re-finance in the future. The market will eventually correct itself; it usually does but in the meanwhile, there is no reason that people should not purchase property right now if they are stable with good credit.
Kathy Awai, R(S); ABR
February 16, 2011
Casey, I agree that there were a lot of irresponsible borrowers as well and that included the flippers, however, many of these first time borrowers I believe were not guided properly as to the consequences of their arm loans escalating. I, as a Realtor, always emphasized to my clients the risk of an arm loan, especially with first time buyers. As far as a great time to buy, it is and I’m not sure why you would want to re-finance on an interest rate that is historically low and it is not necessarily true that they could not re-finance in the future. The market will eventually correct itself; it usually does but in the meanwhile, there is no reason that people should not purchase property right now if they are stable with good credit.
Arrow Creek Homes
February 16, 2011
Kathy,
I think buying a home now is much much better than if you have bought in 2008 (for obvious reasons), what I’m seeing here in North America (Reno, Sacramento) is prices have gone down to a point where even if the market falls further, the mortgage is the same or lower than rent. Which is always good for the long haul not for the flippers.
Thanks Kathy for this post..
Arrow Creek Homes
February 16, 2011
Kathy,
I think buying a home now is much much better than if you have bought in 2008 (for obvious reasons), what I’m seeing here in North America (Reno, Sacramento) is prices have gone down to a point where even if the market falls further, the mortgage is the same or lower than rent. Which is always good for the long haul not for the flippers.
Thanks Kathy for this post..
Kathy Awai, R(S); ABR
February 16, 2011
Dear Arrow Creek,
People who are “flippers” are not in the category that my article
was about. I am referring mostly to long term ownership, folks that want to live and own a home and belong to a community with all the benefits that a community offers.
Kathy Awai, R(S); ABR
February 16, 2011
Dear Arrow Creek,
People who are “flippers” are not in the category that my article
was about. I am referring mostly to long term ownership, folks that want to live and own a home and belong to a community with all the benefits that a community offers.
Catherine Klug
February 16, 2011
Kathy, you made a good argument why now is a good time to buy. It is hard to believe that the lower interest rates would lower your mortgage payment by $500/month. I’m glad to own in Waikoloa Village!
Catherine Klug
February 16, 2011
Kathy, you made a good argument why now is a good time to buy. It is hard to believe that the lower interest rates would lower your mortgage payment by $500/month. I’m glad to own in Waikoloa Village!
Katie Minkus, R(B)
February 17, 2011
Great post, Kathy! 2006 was not a great time to buy, and I told all of my clients at that time that I thought prices were too high and it wasn’t a great idea to buy a home with no money down (no skin in the game) and that planning a series of refinances (to buy big screen TVs, cars and other toys) banking on appreciation was a really bad idea. Not a lot of people were listening, caught up as they were in the fantasy that the market was going to “go up forever.” What market goes up forever??
Your point about interest rates and it being a good time to buy is smart, and right on the money. Interest rates are going up. How do I know? Because as the adage goes, “When you pick yourself up off the floor, there’s nowhere to go, but up.” Anyone who thinks the historically low interest rates that we’re seeing right now are going to go on “forever” is as deluded as the buyers in 2006 who thought their property values would go up forever.
I sat in a room of very, very experienced Realtors today – many who got their start and/or made it through the 18-20% interest rates of the 1970’s. They remember what it was like even if the rest of us have amnesia. Interest rates will go up, it’s an inevitability. Yes, rising interest rates will put downward price pressure on property values, but if you are buying a house that you can actually afford, with a historically low interest rate and you’re buying for the long haul, what does it matter if your neighbor buys the house next door for $20k less but at 12%?? You will still have “won” – it’s not all and only about the price paid for a property.
I said it in 2007 and I’ll say it again today – no one rings a bell when you hit the “bottom” of a market. This blog post is as good as it gets in terms of bell ringing about the bottom of the interest rate market. The smart buyers are listening, and will execute a purchase. The rest will look back and wish they had.
Katie Minkus, R(B)
February 17, 2011
Great post, Kathy! 2006 was not a great time to buy, and I told all of my clients at that time that I thought prices were too high and it wasn’t a great idea to buy a home with no money down (no skin in the game) and that planning a series of refinances (to buy big screen TVs, cars and other toys) banking on appreciation was a really bad idea. Not a lot of people were listening, caught up as they were in the fantasy that the market was going to “go up forever.” What market goes up forever??
Your point about interest rates and it being a good time to buy is smart, and right on the money. Interest rates are going up. How do I know? Because as the adage goes, “When you pick yourself up off the floor, there’s nowhere to go, but up.” Anyone who thinks the historically low interest rates that we’re seeing right now are going to go on “forever” is as deluded as the buyers in 2006 who thought their property values would go up forever.
I sat in a room of very, very experienced Realtors today – many who got their start and/or made it through the 18-20% interest rates of the 1970’s. They remember what it was like even if the rest of us have amnesia. Interest rates will go up, it’s an inevitability. Yes, rising interest rates will put downward price pressure on property values, but if you are buying a house that you can actually afford, with a historically low interest rate and you’re buying for the long haul, what does it matter if your neighbor buys the house next door for $20k less but at 12%?? You will still have “won” – it’s not all and only about the price paid for a property.
I said it in 2007 and I’ll say it again today – no one rings a bell when you hit the “bottom” of a market. This blog post is as good as it gets in terms of bell ringing about the bottom of the interest rate market. The smart buyers are listening, and will execute a purchase. The rest will look back and wish they had.
Kathy Awai, R(S); ABR
February 17, 2011
Everything you covered Katie, is right on the money and I have always told my clients that they should not worry about small price differences when they are buying for long term; a place to raise their families, etc. It’s the “I want everything now” people that have made mistakes that have gotten them in trouble….you now who you are!
Kathy Awai, R(S); ABR
February 17, 2011
Everything you covered Katie, is right on the money and I have always told my clients that they should not worry about small price differences when they are buying for long term; a place to raise their families, etc. It’s the “I want everything now” people that have made mistakes that have gotten them in trouble….you now who you are!