(Originally published March 2, 2010.)
While the US economy remains sluggish, data seems to indicate we’re in a transition to a recovery. Following such a severe recession, many economists concede that the rate of economic growth this year will be relatively modest, but that the recovery will be sustained over time.
In housing, we are seeing signs of stabilization as well. Home buyers here in down-state New York, as well as around the country, are finally coming out and shopping for homes. While the numbers for home sales and home prices have been bouncing around from month to month, it appears that nationally we may be on the mend. The wild card to the real estate recovery is the large number of homes now in foreclosure, potentially hitting the market at destructive prices.
Never the less, if you are contemplating a home purchase, there are opportunities available today that will NOT be there tomorrow.
Home prices are likely at or near rock-bottom. For example, in NYC, residential real estate transactions increased 20% in the fourth quarter of 2009, and 17% overall for the year, compared to 2008. Manhattan sales constituted 55% of the total sales in the fourth quarter. The average sales price of a home (coops, condos and 1-3fam dwellings) in NYC was $679,000. This is up 1% from 2008 numbers.[*]
The Homebuyer Tax Credit will expire in a few months. The federal government is still giving away up to $8,000 to first time buyers and up to $6,000 to all other buyers of a primary residence (income limits do apply). But in order to get this free money, you must be in contract by the end of April and close by the end of June. Think you have plenty of time? Think again. Ask your realtor or real estate attorney how long it takes to close the average real estate transaction.
Right now, mortgage rates are still at all time historical lows. This too shall pass. At some point, economic growth will trigger the Federal Reserve to start unwinding its unprecedented stimulus by raising interest rates or withdrawing support for the US mortgage market. This is not a mere prediction. This will happen. The Fed will continue to wind down emergency lending and asset purchase programs. We could see the first of a series of interest rate increases by this spring or summer. While mortgage rates are not controlled by the Federal Reserve, the effects of these Fed actions will trickle down to the mortgage markets and rates will rise.
Prospective home-buyers should prepare now by putting together a winning team of advisers comprised of a qualified Mortgage Planner, a competent Realtor, and a Real Estate Attorney. Find out what you can afford and what price range fits into your budget. Get Pre-Approved. Then, once you’re fully armed, go out there and look at homes! Otherwise, procrastination will cost you thousands of dollars in lost tax credits, higher interest rates, and potentially higher home prices.
Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.
[*] National Mortgage News, volume 34/number 19, 02/08/10