Should You Buy a House Now or Wait?

September 28, 2011 No Comments »
Should You Buy a House Now or Wait?

With mortgage rates on long-term fixed-rate mortgages finally slipping into the 3% range, mind you just barely, more fence-sitters may be pondering this very question.

From a mortgage rate perspective, it’s a no-brainer. Now could be the best time to buy a house…EVER.

Heck, homeownership is starting to look pretty darn attractive with those ultra-low monthly mortgage payments, especially coupled with depressed home prices.

But from a broader economic standpoint, not so much.

Economy is Ugly

Things still look bleak, with unemployment expected to remain high for the foreseeable future, and fears of a complete economic collapse still swirling.

An economic outlook released this week by mortgage financier Freddie Mac perhaps said it best:

“With monetary policy expected to keep interest rates low for a while, affordability will remain high for potential homebuyers. In the meantime, many will choose to rent.”

Huh? Affordability will remain high, but many will choose to rent? How does that make sense?

And why are they choosing? If they have a choice, how could they not possibly buy a home right now?

Current Homeowners Banking on Prospective Buyers

If they’re choosing not to buy a home, what about those who currently own a home worth half the balance of their mortgage?

You know, those with deeply underwater mortgages that aren’t quite ready to walk away, who are banking on seeing positive home equity at some point in the next decade.

Pretty scary notion that prospective homeowners who could enter the market in positions much better than existing homeowners aren’t willing to.

But the way they see it, it’s scarier to take the plunge, given the economic uncertainty in the air.

After all, it doesn’t make a whole lot of sense to start a family and form a household when you’re not sure if you’ll keep earning what you’re earning, let alone keep your job.

And so that may explain why the low rates aren’t causing many to bite, at least not home buyers.

Refinance Share Nearing 80 Percent

Meanwhile, the refinance share of loan applications is rising, and is now near 80 percent, per the Mortgage Bankers Association.

Previous estimates saw the purchase-money mortgage share rising to 50 percent by now…not even close. Just wait until the traditionally slow fall and winter home buying seasons.

On top of those not willing to take the plunge, there are plenty out that there can’t even buy a home if they wanted to, thanks to that unemployment issue, along with more stringent mortgage underwriting guidelines.

And roughly 20 percent can’t buy because they fudged up their previous mortgage.

Imagine if the loose underwriting that was in place during the boom was still in place…everyone would own a home. But we know that’s bad news…

All that said, you’ve got to figure that buying a home right now can’t be all bad. As mentioned earlier, you’d be much better off than those who bought five years ago from a home price, equity and interest rate perspective.

The question is whether you need to hurry up and make the decision. Given the relatively high chance of more bad economic news, along with forecasts of lower home prices in the near future, it may pay to wait and buy next year if you’ve got time.

You may find a lower home price and a similar mortgage rate in six months.

And in the meantime, you can get your finances in order to ensure you qualify without worry when that time comes.

Read more: Tips for first-time homebuyers.

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