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5 Reasons to Buy a Home Now

January 20, 2009 by Chase
There’s a brief exchange I had a few years ago with a friend’s father that I’ll never forget. We were sitting outside a Washington DC lunch spot talking about what I was going to do when I got out of college when I asked Mark, who’s been a real estate developer in Maryland for years, whether or not real estate would forever exist as a lucrative business.

His answer was short, but it explained every inquisition one could have about the real estate business: “God’s making more people, but He’s not gonna make any more land, okay?” Yes, things were looking good for the real estate business.

That verdict’s since changed, and the real estate business’ downfall is an occurrence that can be directly attributed to that one piece of the puzzle that Mark omitted: money. There are too many Americans who simply don’t have enough of it, and with it, there’s a much greater percentage of people now that have significantly less money than they did five years ago.

Currently, the American housing market is in disarray. Last year saw an 81% jump in home foreclosures as 861,664 families were forced to move out, and there are thousands of Americans wondering whether it’s best to buy a home or rent until the situation resolves itself. But misfortune for some can lead to opportunity for others, and those who are in question should consider these five truths that encourage home buying during this time of conservative spending.

Mortgage Rates Are At All-Time Lows
Mortgage rates reached their 2008 apex in July, when the long-term average rate hovered just below 7%. They’ve since plummeted to below 5%, and there’s strong evidence supporting the idea that mortgage rates could dip to an even lower figure before we reach the third quarter. This makes financing your home significantly easier, as the money you spend over a thirty year period paying off your house gets lowered to something you may actually be able to afford.
Less Buyers Means More Negotiating Power for You
Those real estate agents still need to sell their homes, and the fact that there exists less competition on the homes you’re considering could translate into better savings for you. Be smart when talking to agents, and remember that the struggling market has given you the upper hand in determining price.
Desperate Times call for Desperate Measures for the FHA
The Federal Housing Administration is offering 3.5%-down mortgages to qualified buyers despite the fact that the subprime loans these types of buyers would be borrowing from have already dried up. Last year, over 630,000 individuals bought homes in part because of the FHA’s low down mortgage rate, and there are many experts who believe that FHA loans have been the driving force behind real estate sales recently. Applying for an FHA loan is rather easy. Just follow these simple instructions.
Newfound Guidelines put on Fannie and Freddie
According to CNN, one of the major contributors to the rapidly increasing price of homes in the past few years was that home appraisers, pressured by loan officers and mortgage brokers, would inflate home values. As a result, homebuyers would either end up paying more or would be put in a situation in which they couldn’t handle their mortgage payments.

The Federal Housing Financing Agency recently announced the Valuation Code of Conduct, which will take effect this May and serve as an attempt to improve the reliability of appraisals for mortgages sold to Fannie Mae and Freddie Mac. Under the VCC, lenders are now prohibited from influencing home values appraisers may come to.

Home Prices are Dropping
Home foreclosures have a close relation with home prices, and the fact that so many people have been forced to foreclose make it easy to predict that the price of homes across the country have dropped a great deal. Prices have dropped by 30% in such metropolitan cities as Los Angeles, San Francisco and Miami and 40% in Las Vegas and Phoenix. Nationally, prices have fallen more than 21% in the past year, and the national average has gone down each of the last 27 months.

Experts indicate that we haven’t seen the bottom yet, but planning for that bottom and hitting the housing market at the perfect time may be more difficult than worth your while. Keep a close eye on the national average and the S&P/Case-Shiller 20-city Home Price Index, but don’t rule out diving into the housing market before a talking head on television tells you that home prices have reached rock bottom.

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