The economy has been softening for months and lately Americans have been paying attention. The subprime mortgage crisis has caused continuing corrections in the home loan mortgages and the housing markets. The housing market has shifted from a seller’s market during the past housing boom to a buyer’s market today.
Even though the home buying market has seen a steady decline in home prices over the last few months, only now are consumers awakening to the opportunities in the real estate housing market. The Federal Reserve has lowered interest rates to unprecedented levels and pace. The combination of low mortgage rates and home prices has led to a jump in mortgage application volume twice this year. The Mortgage Bankers Association (MBA) reported earlier this month that the rate of mortgage application volume increased by 8.3 percent.
The home loan arena has seen mortgage lenders and mortgage brokers implement stricter mortgage loan lending practices. Herein, to see applications volume rise with stricter underwriting is seen by some as lower interest rates having an impact on people’s decision. Over half of the loan application volume increase was due to mortgage refinancing. Most eligible consumers are converting their high interest adjustable rate mortgages and subprime adjustable mortgages to traditional fixed rate mortgages.
This is an opportune time for homebuyers to get off the sidelines and seriously examine purchasing a home. According to Merrill Lynch last week, the housing prices will decline further this year. The bank predicted that prices will drop by 15 percent in 2008 and possibly another 10 percent in 2009.
However, the National Association of Realtors (NAR) believes that Merrill Lynch’s forecasts are not realistic. NAR forecasts housing prices to stay flat in 2008. There are still many variations in local home markets with home prices increasing in some markets.
So who does the homebuyer believe? It is more important for the homebuyers to leverage their bargaining power as soon as possible, instead of waiting for the home prices to decrease further. The home buying process on average is a tenuous and lengthy one. After seeing several homes, you settle on one that meets your needs.
However, if you wait on the sidelines, awaiting lower prices, you might miss out on getting the house you like. For example, let’s say you start looking for a home five months down the line expecting lower home prices and it takes you another 8 weeks to narrow down your choice.
So while you negotiate the deal and try to line up home loan financing, the housing and mortgage markets start to rebound. By waiting too long, you may end up buying a more expensive house with a higher interest rate loan. If you are in the market for a home, start searching for your home now, as well as trying to get pre-qualified for a new home loan. You never know when home prices and interest rates will rebound.