Buying a Home Now Is A No-Brainer

Is now the right time to invest in a house?
Trick question. Actually, it's two questions.
Question No. 1: Is now the time to buy?
Question No. 2: Is buying a house a good investment?



The first answer is easy: With a few exceptions, if you have 20% to put down and good credit, now is a great time to buy. That's been the case all year, and I'd argue that we're probably closer to the end than to the beginning of the really great time. Let me explain.

Back in January home prices had dropped 28% from their peak. More important, interest rates were at historical lows. By locking in a mortgage for 15 or 30 years on a value-priced home, you were getting an incredible deal, even if home prices decreased.

At the time, I thought that prices and rates were more likely to rise than fall. I was half right: Home values have been inching up since the spring, but mortgage rates, incredibly, dropped further.

By August (the latest numbers available) the median home price had risen 1% over a year ago, but 30-year rates had dropped a half-point to 4.5%. Assuming 20% down and a 30-year mortgage, the total cost of owning a median-priced home is now down $16,000 from a year ago.

Home values may waffle over the coming year, but because Americans take out such large, long mortgages, rates are what really matter. And I am more likely to grow hair than see 30-year mortgage rates drop below 4%. It's far more likely that rates (and the cost of ownership) will rise.

Now for question No. 2: Is a house a good investment?

First, it depends on what you mean by investment. If your definition is strictly about dollars returned, a house probably won't be a great use of your capital. If you bought the median-priced house today with 20% down, to recoup your total costs (and I'm not including property taxes and maintenance here) over three decades, the home's value would have to rise about 3% a year.

That's likely, but you'll almost certainly (we all hope) do much better than that in the stock market. The fact is, however, that that's the normal case for housing; the booms that began after World War II and in the late 1990s were the exceptions.

That said, the key point to remember is this: Buying a fairly priced home at today's rates may be the best deal you will ever get. And who knows? It may even turn out to be a good investment.



Courtesy of CNNMoney

Inflation: How will it affect the Whidbey Island Housing Market

"INFLATION IS WHEN YOU PAY $15 FOR THE $10 HAIRCUT YOU USED TO GET FOR $5 WHEN YOU HAD HAIR." - Sam Ewing. And regardless of how much hair you have these days... one thing we can watch to help a get sense of where rates are going is inflation.

Right now, the headline numbers in the US show little inflation overall... but we are already seeing significant inflation in particular items like commodities, food, and oil - which are being driven by a weak US Dollar, and increasing demand from emerging countries like China and India. In addition, the global market reacted late last week to higher-than-expected inflation in China. This is important to us because Bonds and home loan rates hate inflation, no matter where the whiff of it comes from.

Here’s why. Think of inflation as a hot air balloon and rates as the basket under that balloon. As the balloon (or inflation) rises, the basket (or rates) must rise as well.

So, if inflation moves higher in China, their government has to raise rates to fight inflation. And if rates move higher in China, global investors seeking the highest yield will move away from the relatively meager returns seen in US Bonds - and move their Bond buying money into juicier yields found abroad.

There are so many opinions by so many smart people on both sides of the inflation argument, but right now it is all about what the Bond market thinks. And the recent market action shows just how quickly sentiment in the market can change. Remember, it was just a few weeks ago that fears and whispers of deflation helped the Bond market - and home loan rates - improve.

But now with the Fed intent on avoiding deflation and in fact creating inflation through another round of Quantitative Easing (or QE2), the entire Bond market - including Mortgage Bonds - have began to react negatively. Remember, Quantitative Easing is the concept of the Fed becoming a buyer of Treasuries and Bonds, in a bid to stimulate the economy by:

• Creating inflation


• Lowering the unemployment rate


• Raising Stock prices

While those goals may be good for the overall economy, we need to remember that all three are very unfriendly to Mortgage Bonds and home loan rates.

The good news is, despite ending the week worse than where they started, home loan rates are still near historic lows for the time being. If you or someone you know is looking to take advantage of low rates, now is the time. Please call (360-675-5811) or email me today to get started.

Info courtesy of: AlaskaUSA Mortgage

Time to Review Your Annual Credit Report

Rick Schutte, Broker/Owner of Coldwell Banker Koetje Real Estate in Oak Harbor, Wa. interviews Lyn Bankowski, senior loan originator, from AlaskaUSA Mortgage about the need of checking your annual credit report.

In this interview, Lyn mentions the free reports can be found at https://www.annualcreditreport.com/. This central site allows you to request a free credit file disclosure once every 12 months from each of the nationwide consumer credit reporting companies.  AnnualCreditReport.com is the official site to help consumers obtain their free credit report.  You can also go to http://ftc.gov/freecreditreport for more information. 
The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies every 12 months.

For more information on credit reports and real estate, please contact us at any time.  

First-Time homebuyers stoke demand for smaller homes

First-time homebuyers are contributing to an increase in demand for smaller and less expensive new homes, according to research from economists at the National Association of Home Builders (NAHB). Delving into data from the most recent biennial American Housing Survey, which was conducted by the Department of Housing and Urban Development and the Census Bureau in 2009, the study, "Characteristics of New and First-Time Home Buyers," finds that 41 percent of the 8.4 million households who bought a home between 2007 and 2009 were first-time buyers.

The market share of first-timers was up from 35 percent in both 2005 and 2007. Although some of the demand was fueled by the initial version of the home buyer tax credit in mid-2008, which was specifically targeted to those buying a home for the first time, the upward trend is expected to continue as children of baby boomers - members of a generation that is larger than their parents' - move into their household formation years in the period ahead.

First-time buyers for the two years of the study had an average age of 34, compared to 46 for those trading up. The average income of first-timers was over $67,000, about 30 percent below the average household income of trade-up buyers of $97,000. About half of the first-time buyers earned less than $60,000.

The household size of both first-time and trade-up buyers has been declining, while single-person households have been on the rise. First-timers bought homes with an average market value of about $184,000, compared to more than $297,000 for trade-up buyers. First-time buyers bought homes averaging 1,874 square feet, significantly below the 2,549-square-foot home purchased on average by those trading up. Forty-six percent of first-timers bought homes smaller than 1,500 square feet.

The full report is available here.

Waiting For Home Prices to Go Lower Can Cost You Money

While it seems that waiting for the price of Whidbey Island homes to go lower before purchasing is a good idea, it may cost you more to wait than to purchase now. Trying to time the bottom of a market, to get the "best deal" is very hard to do. With interest rates at their lowest levels in quite some time, it is in the buyer's best interest to negotiate their best deal now and lock in the mortgage rate that is currently available. It is recommended that you visit with your local Whidbey Island lender and get pre-qualified at today's interest rate and go shopping for your dream home now instead of waiting for prices to go lower.

This video discusses and compares the differences of interest rates. Please feel free to call us with any questions or visit our Whidbey Island website for further information.