I was reading an interesting article in the Saturday morning paper about new home purchasing. The article was written by Kenneth Harney a nationally syndicated real estate columnist. The article is about what it would take to get a survey group of 700 interested luke warm home buyers to take the leap into purchasing a new home.
I found the article interesting from the aspect, that many Americans like me are looking to strengthen their financial position in case of a job loss, wage cut and tougher economic times. To personally strengthen your financial position reducing debt, lower a house payment, moving, consolidating mortgages or getting 2% points better on your interest rate all come to mind.
The survey group when asked why they hadn’t bought a new home yet, the majority responded they are holding out for lower rates, followed by uncertainty of qualification and third was a continuing fall in home prices.
These are all questions I have pondered in my own situation as well as any home owner. So I am reading on thinking blah, blah, when I actually turn to the second page of the article. At this point the article sheds some insight into the direction the builders and the market looks to be going.
When the panel was asked what would push them over to pursuing buying a house they came up with the following answers.
1. A fixed 30 loan at 3%. There are some companies offering 3.99% and 3% for the first five years, but then an upward adjustment to 5%. The group said 3%.
2. Zero down tends to be extremely appealing. Zero down in this writer’s opinion is part of the problem that started this economic mess and got everyone over extended in credit/debt and inability to save sufficiently.
3. Knowing they will be accepted is a big concern now for home buyers. Everybody has been scared half to death about the credit crunch. Many believe they cannot get credit without a high credit rating. People are concerned they will not qualify.
4. 10% discount on listing. An effective way for the buyer to get instant equity and closer to that 20% PMI insurance requirement. (A buyer can eliminate PMI insurance when he has 20% equity in a home.) This will reduce his overall payment significantly.
With these types of answers it will be interesting to see how the builders response.
On another note, the Obama administration is getting lobbied by the builders for a 10% federal tax credit up to $22,000 to help motivate buyers. This incentive came in behind all of the incentives I had listed.
Bottom line, it looks like there are still more changes to come in the housing market and waiting it out if you can afford to do so, might still be the best option before buying or refinancing.
