IGNORE THE HEADLINES AND STOP WATCHING THE NEWS
Saint Paul, MN. Foreclosure foreclosure foreclosure. That is all we see and hear. This would have you believing Chicken Little that the sky is falling. Yes, there are a lot of personal financial disasters with a record number of people losing their homes. The vast majority fall into two categories:
EXISTING homeowners who were encouraged to load up on debt by using home equity loans to pay for anything and everything, stripping away the safety and security of their equity position. I constantly speak to people who have owned their home 10, 15, 20-years, who owe 100% of TODAYS VALUE. I must ask. Is that a banking industry issue, or a consumer gone crazy issue?
NEW homeowners who over bought using 100% financing and high risk adjustable and interest only loans. Home owners were drawn to these loans like bugs to a bug zapper because they allowed them to buy more expensive homes while keeping payments low, albeit temporarily. Again, a banking industry issue, or a consumer gone crazy issue?
The reality, while the numbers are at record highs, the overall percentage is extremely low. Adjustable rate mortgages cover only a small fraction of homes. Sub-prime loans makes up only a fraction of adjustable loans. Furthermore, most foreclosures end up with the lender recovering much of the original principal. So why is there such enormous unease with consumers and the financial markets?
THE GOOD NEWS. For every foreclosure there is a first-time home buyer getting a fantastic deal! As values increased, many first-time buyers were priced right out of the market. With the finance everyone for anything party over, home prices have fallen nationwide around 5%. Some markets even more.
This won't last for ever. Yet many people are sitting on the sidelines waiting, hoping, for prices to fall further. Look at the chart below. If one assumes a little further drop in home prices, does it really make sense to wait to buy? Rates are low today, but as the economy recovers, rates should go up to stem inflation. A 30-year fixed rate under 6.00% may soon be only a distant memory.
Why Waiting To Buy may be a Bad Idea!
Put 20% down, get a 30yr fixed rate loan
|1-Yr from now
Recession ends, rates go back up
|Most people wanting to buy, but waiting to buy, do so on the idea home prices will fall further. This shows why waiting may not pay off.|
THE BOTTOM LINE: If you are financially ready to buy a home, plan on living in it for 4 to 5-years or longer, you are almost foolish NOT to buy a home today.
Learn more at www.MnHomesAndLoans.com
Copyright 2008, Joe Metzler, www.JoeMetzler.com. All Rights Reserved.