Now May Be The Time to Purchase a Home, At Least in Florida

Notice this image of the scales. Normally, when one side goes down, the other side goes up. That is usually the relationship between mortgage interest rates and home prices. When interest rates are low, more people can get loans for larger amounts. This causes more demand for homes so the sellers can demand higher prices.

When interest rates go up, fewer people can qualify to borrow money, thus the sellers must lower the prices of the homes in order to be able to market them.

At this point in time, though we hear doom and gloom on the news, for buyers who have been sitting on the sidelines, this may be a great time to make that puchase. Interest rates are the lowest they have been in quite a while, yet home prices are also down. In our area outside of Tampa, several developers are now selling homes for less than $100 per square foot! They have not done that since before the "boom". When you consider the rising costs of materials, it is doubtful that they can go much lower and not lose money. Have we hit the pricing bottom? There are never guarantees, but I bet we are pretty close. Even sellers of existing homes are finally getting the message. They must price their homes attractively, or they face months, if not years, sitting on the market.

I have an uncle who plays the stock market a bit. He does not wait until a stock's price hits rock bottom since no one can predict when that will happen. But when a sound stock's price gets historically low, he begins to buy. Even if the price drops a bit lower he knows that if the company is sound, eventually the price will rise above what he paid for the stock and he will make a profit.  In the same way, over the centuries, real estate has been a very good investment. Certainly better than renting. If you see some housing bargains out there, now may be the time to take advantage of low interest rates and make that buy.

One word of warning that I would give is that in today's market, it is very important to have a good credit history. Though it is not impossible to get a loan with less than perfect credit, it is infinitely harder than it was a few years ago. Subprime loans are almost a dirty word. However, if you have created an excellent credit record, the lenders will be happy to work with you to get you into your new home.

So now we have an unusual situation, interest rates are down and home prices are down. It is not often when both sides of the the scales DROP. At some point the Federal Reserve will become afraid of inflation and raise interest rates. Or the costs of fuel, and thus building materials, will force developers to charge more for their homes. In either case, you will be paying more for a home that you can buy for much less now.

One final note, when you buy at a lower price your insurance rates will be less and so will your property taxes, since both of these are directly linked to the value of your home. Keep that in mind.

And for those individuals who are waiting for prices to increase before they list their homes, keep in mind that the home you will buy once you sell your current residence will also have a higher price on it. Get 10% more for your current home, pay 10% more for your next one.  And as I mentioned in the previous paragraph, at the higher price your insurance and taxes will cost you more too.

For more information or questions about this topic please call me at: 813-783-4444 or e-mail me at: jelwell1@tampabay.rr.com

I also invite you to visit my my website where I think you will find a lot of useful information. To get there just click on the following link: www.jelwell.century21bnr.com