Is it better to buy while interest rates are low or wait for home prices to drop more?

Asked by J, Sacramento, CA Fri Jun 13, 2008

Im not sure how high the interest rate can go but it appears to be going up. Should I buy a house now with a lower interest rate or wait and buy the house for less hoping to refinance later?

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49
Sue Archer R…, Agent, Palm Harbor, FL
Sat Jun 14, 2008
BEST ANSWER
I heard someone give this analogy to trying to find the 'low' in the real estate market-

If you were bouncing a ball, can you catch it when it hits the floor? Especially when a ball is so much more predictable in that you know the speed at which it's bouncing, about high it will go up, and also, you know where the floor is.

So if you can't catch a ball at the lowest point, then why do people think that they can predict the low in the real estate market??? And does it matter? If the home is affordable to you, and it makes good financial sense in your plan, then buy it now. As Frank so eloquently explained, I believe, that in the current market, interest rates are more likely to go up (and that's a commitment for 30 years), than home prices are going to go down, (if at all ) in the price range you're referring to.

Read 'The Richest Man in Babylon' and 'Rich Dad Poor Dad' (better yet get the game it really is great education on financial matters such as this). You'll figure out your personal approach to a financial plan, and that includes buying real estate.

Good luck J!

Sue Archer
Realtor, GRI, ABR, SRES
The Galster Group
(916) 847-9686
Web Reference:  http://www.suearcher.com
2 votes
Would be better to get the opinion of someone whose income is not directly tied to the selling of real estate....duh...
Flag Tue Nov 29, 2016
John the Bru…, Home Buyer, Connecticut
Sat Jun 14, 2008
You people are out and out lying to your clients.

IT IS ALMOST ALWAYS BETTER TO PAY A LOWER PRICE AT A HIGHER RATE THAN TO PAY A HIGHER PRICE AT A LOWER INTEREST RATE!

Example 1: A $320k loan at 10.5% (10.5%!!!) still has a lower monthly payment than a $480k loan at 6.5%.

Example 2: A $480k loan at 8.5% still has a lower monthly payment than a $640k loan at 5.75%.

Low interest rates are not “more valuable” than lower prices. Quite the opposite, actually. Again – you only have one shot at your purchase price and missing on that shot can prove costly.

Realtors® pretending to understand finance are like carpenters thinking they can be brain surgeons. Just because they have the tools to do the job doesn’t mean they should be trusted with it.

Plan accordingly, friends.
10 votes
John the Bru…, Home Buyer, Connecticut
Mon Jun 16, 2008
Oh, silly Realtors®.

Let me respond in turn. And please keep the thumbs down coming Realtors®. I’ve obviously hit a nerve with all these facts, figures and calculations. Pesky numbers!

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Elizabeth said, “I believe the question was should the buyer purchase now, in this market, in this climate in Sacramento, given the 11% increase in closed sales in May over April and the 48% increase in closed sales for May over the same time last year, coupled with rising interest rates. I don't believe the buyer was referring to Connecticut's market nor whether interest rates as a whole are more important than pricing.”
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Uh, no. That wasn’t the question. The question was, “Is it better to buy while interest rates are low or wait for home prices to drop more?” Direct quote. It’s the question that’s right at the top of this page and it’s the question that I answered. As for your point about me being in Connecticut; I didn’t know that you need to live in California to understand the basics of finance and economics. My bad.

Furthermore, Elizabeth, you don’t have to live in California to know that the median price of a home in Sacramento was down 35% during the three months ended May 31 compared to the same period last year, according to Trulia.com.

It’s hardly a “great time to buy” as prices continue to accelerate in their downward trend. Why buy today when I can buy for less tomorrow; unless wiping out the hard earned equity of your clients is your goal. Your “buy now before you’re priced out forever” mantra scared people on the way up, but it makes you look silly on the way down.

The gain (expected value) that a potential buyer stands to benefit from a 95% certainly of continued price depreciation is much greater than the 40-60 percent chance of rates increasing in the near term. I’d wager that it’s greater even with a 100% chance of rates increasing in the near term given the velocity equity evaporation in California.

I do give you props for going counter to your Realtor® friends in admitting that price is more important than rates.


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Bill said, “…because we are near the bottom.”
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Uh, yeah. You guys calling bottoms every month is the height of comedy. The downturn continues to -accelerate- and you’re calling a bottom? We are so far from the bottom that Realtors® will pine longingly for the terrible market conditions we have today and count themselves lucky to have experienced it so good.

We’re in the “rearranging the deck chairs on the Titanic” phase of this downturn. You can still talk-up real estate and make it look pretty. Some people may even still believe that real estate never goes down, just as they thought that the “Titanic is unsinkable.” Maybe this time it is different. Is it getting cold out here?


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Jim said, “Inflation is likely to begin offsetting the decline in areas where property values declined, and I expect prices to at least stabilize if they don't start going up in those areas by the end of the year.”
------------

Jim – unless you live in the Weimar Republic, circa 1923, there is no way inflation will outpace the decline in real estate values, especially those in California.
8 votes
John the Bru…, Home Buyer, Connecticut
Sat Jun 14, 2008
Realtors® love to tout low interest rates. If it was the other way, and interest rates were high, they’d be screaming about the resultant low prices!

Let me let you in on a little secret. Interest rates don’t matter. Yep, you heard me right. They don’t matter.

Want to know what else doesn’t matter? The term of your loan (10 year, 15 year, 30 years), the payment, the future value of the mortgage (i.e. is there a balloon payment due at the end..) etc, etc.

I’m being over the top to make a point. They don’t matter -much- because they can all be changed down the road. You can change your payment, you can change your interest rate and you can shorten or lengthen the term. It’s easy – just refinance if rates come down later. A whole industry exists to do just that.

BUT - the one thing that you can NEVER change is the purchase price. The price you pay is the price you’re stuck with. You cannot change it. Buy high now and they’ll be no way to change it down the road.
7 votes
Jeff Ranta, Home Buyer, Sacramento, CA
Wed Jun 25, 2008
'I would recommend buying a home while the interest is low. While you are waiting for the home prices to go down, interest rate can go up and home prices may start going up. Home is an investment but also a place to call a home. If you are planning on living in your home for at least next fieve years and you are ready emotionally and financially then it is a good time to buy. Rates and the home prices are great right now. Take advantage of it now. Even if the home prices go down some more, if the rates go up, then you are where you started from. NO WHERE!!!'

All I heard was, 'Buy now or be priced out forever!' Ridiculous.
6 votes
Nico, Home Buyer, Citrus Heights, CA
Sat Jun 14, 2008
You need to decide what is more important - buying now when there still could be a decline in values but interest rates are still really low --or-- buy later when home prices have either hit bottom or have started going up again and interest rates are unknown.

My family and I have decided to buy now - why you ask? Because like stated before, I can't time the bottom. Also we really want to be able to get settled in our home - paint the walls, raise the kids, decorate, plant a garden, etc. We plan to be in our home for at least 5 years.

I have been in bidding wars on 8+ homes in the +/- $200k range. I can tell you I am working with an agent on Trulia who is great and very patient. Things are very competitive in this range and I do think we are close to the bottom in price. Look at the supply and demand. Supply is going down, demand is going up. Price seems to be leveling off in my range.

Even if prices do go down a bit more, I will be happily living life in my house with my low interest rate that I will not have to refinance (which costs money to do by the way). If my $200k house is worth $160k by the time the market hits bottom (i think it is unlikely it will get that low), I know I will make it up in the long run. You have to make the lifestyle choice.
6 votes
NonRealtor, , 23456
Sat Jun 14, 2008
You should wait. When they raise interest rates, prices drop more.
6 votes
John the Bru…, Home Buyer, Connecticut
Mon Jun 16, 2008
> The question was referring to the Sacramento market, John.

I know that, Elizabeth. Did I happen to post something not relevant to the Sacramento market? If so, let me know and I'll delete it to make room for Realtors® to post more “now’s a great time to buy” messages.
5 votes
John the Bru…, Home Buyer, Connecticut
Mon Jun 16, 2008
Of course, my friend. It will, however, incur the wrath of the thumb's down Gods, as evidenced here.

Hope all is well,
-John
5 votes
Jared, Home Buyer,
Wed Jul 2, 2008
I really wish "buyer experts" like yourself would work in our field for a while before they shoot their mouths off like the idiots they are.

----------------------------------------

So do all the "smart" people who bought in '05. Just because I didn't take the time to check the Pro box on my profile or pass the exam for a real estate license doesn't make me less "in your field." Many "buyers" have been sitting on the fence for years with very informed opinions. I know that I have been looking for as long as most CA realtors have been working in your field, and a good customer making the "biggest purchase you will ever make" should do extensinve research. Many of us have done that research. This forum is a place where people with both opinions can meet to provide information to others who may want to hear all the opinions. If they only wanted people who worked in your field (realtors), there are many many ways to email you specifically.

J, my opinion is that buying an interest rate is a bad idea. Once you find the home you want at a price you can afford (and that you don't think is going to leave you upside down for a decade) you should buy it at the best rate available. I belive the John and Tim clearly stated the cause and effect of rates and if you talk to a veteran banker I'm confident that they will back that up. Good luck and I hope you find a home you are happy in for years to come.
4 votes
Jeff Ranta, Home Buyer, Sacramento, CA
Wed Jul 2, 2008
Banks are collapsing, the economy is tanking, there are no more neg-am, liar, interest only, no-doc loans available and suddenly in a couple months the housing market is just going to rebound just like that? You're dreaming. I swear that Realtor's are all zombies brainwashed by the NAR...'Buy now....or be priced out forever....buy now...its a great time to buy...buy now...' Is that all you guys say?

The height of the foreclosures are just starting so unless the gov steps in and stops all the foreclosures or one of the class action lawsuits against the banks for creating this mortgage disaster actually succeeds then were in for a rough ride for quite a long time.

And thanks for quoting Money Magazine and NAR, that gave me quite a laugh.

Just to recap Lower Prices > Lower Interest Rate.

Also, if and when we reach the bottom, it is not going to shoot straight up like it did in the bubble years. It will stay flat for a long while or rise with inflation so don't worry about catching it at just the right moment.
Web Reference:  http://ml-implode.com/
4 votes
Jeff Ranta, Home Buyer, Sacramento, CA
Wed Jun 25, 2008
Like John said, it's better to wait for lower house prices. Rates will change down the road, the price you paid won't. And I don't know if you've seen any of the housing graphs, but were in a very steep downward trend. It's not going to all of the sudden stop and go flat or even rise for quite a bit.
4 votes
John the Bru…, Home Buyer, Connecticut
Tue Jun 17, 2008
Realtors® are coming back and deleting their messages. Why, I wonder?
4 votes
NonRealtor, , 23456
Sat Jun 14, 2008
Less purchasing power = lower home prices. If you're worried that there will not be enough homes, don't worry they'll build more. If you put 20% down, and the prices drop another 20%, yep, you lost your down payment...who knows how long it will be before the prices go up again...maybe 10 years or so.
4 votes
John the Bru…, Home Buyer, Connecticut
Wed Jul 9, 2008
> I like to not read the responses until I respond...then compare.

Haha, Paula Swayne.

I guess this is how a thread ends up with so many GTTB messages. When you have only one response to every question, people just end up tuning it out.
3 votes
Cesar, Home Buyer, Charleston, SC
Mon Jun 23, 2008
Well , if you are paying cash it is pretty easy to know what is best.

Otherwise, people buy homes they can afford on a monthly basis. Yep, that 500k home was bought thinking it merely was 3k/mo. Used to be that most homes were bought on 30yr fixed loan. Banks changed that to ARMS and people were still able to afford the 3k monthly payment, at least for the first 5 yrs, even if price was 1 million.. That's not going to change. What has changed is the perception that houses always go up. Banks might not want to do ARMS anymore or might be more picky. But, people will still buy homes according to the monthly cost. If rates go up, price will come down. Buyer will only be able to afford 3K. Supply and demand will have to meet at 3k. Price and interest rates balance each other out. To answer your question, it will not make much difference. What will make a difference is the cost of living. With gas and food prices going up, the buyers might/will not have 3k to spare anymore. They might be left with 2k or so. Supply and demand will have to meet at a lower price. Add the fact that people don't have the expectation of getting rich by being a homeowner and the fact that there is a zillion boomers about to retire with no savings who will have no choice but to sell their house. There will be a zillion sellers left and right. Houses will keep coming down. Just sit tight. People with savings will be reaping rewards of high interests and low prices. On which camp would you rather be? A 500k underwater mortgage or 100k in the bank making 10%?
3 votes
Frank Diaz, Agent, Honolulu, HI
Fri Jun 13, 2008
Excellent question! Let's call the psychic hot line. I wish I knew. I think the biggest factor is the interest rates. Our local economist uses 7-year rates to make his predictions. Here is the 10-year Treasury Note: http://www.forecasts.org/10yrT.htm 5-year: http://www.forecasts.org/5yrT.htm

IF (as in capitalized if) oil prices come down to a reasonable level, AND food prices stabilize, AND we don't have any major economic catastrophes, AND depending on the price of rice in China, interest rates may stop rising, and possibly decrease. Every time oil prices jump, Mr. Bernanke at the Fed is under pressure to raise interest rates, because everyone has to spend money to pay for gas to get to work. Everyone is spending instead of saving. Banks have to pay more for deposits too. I think we are in an oil bubble now, but that's a sticky topic (sorry).

My point it that a 1% increase in rates will affect your buying power by between 5 and 10%. So, that $400,000 condo at 6% now with 20% down (~ $2100 per month), now costs 10% more 6 months from now with an interest rate of 7% (~ $2300/month) . Find a mortgage calculator and see:
http://www.hawaiihome.biz.z57preview.com/mortgage_center.shtml

On the other hand, more bad news in the housing market will cause more inventory backlog and prices will have to decrease, since less of us will qualify to buy! It's a big mess.

I always tell people the same thing when they ask me when they should buy: "When you can afford it."

Yes, you can wait and the rates may increase or you can buy now and the price of the home could decrease. Will home prices drop by 10% or will the rate go up by 1%? Call your agent as soon as you know, because I don't know. The interest rate is the big IF. Learn as much as you can about your local market. Talk to your friendly neighborhood Realtor. Get qualified by a loan officer. Be ready to move and when you feel comfortable, get your best deal.

Aloha,
Frank

PS The Wall Street Journal yesterday said inflation is in check temporarily since we can't afford gas to get to the store or restaurant and aren't buying things. We'll see.....
3 votes
Jim Walker, Agent, Carmichael, CA
Mon Jun 23, 2008
The two year old linked article was very good. It clearly explained why it makes sense to wait for a proportionatly lower price even when the resulting mortgage payment is the same.

I made it clear that buyers should not buy if they are confident that home values will fall further. I just happen to think that the bubble has popped and the baloon has crashed. If a 50% decline is just the tip of the iceberg to fans f John the Bruce, then you are welcome to wait some more.

I did not buy during the bubble. Now that the bubble has burst, I will be putting my own money were my mouth is.
2 votes
Tim, , Boston, MA
Tue Jun 17, 2008
J,

This is somewhat of a cause and effect issue. I believe that interest rates are going to up considerably in the next couple of years, but I also believe that as interest rates decrease buyer's purchasing power, home prices will decrease in step.

But, If the house you really want comes available, I say negotiate a good price and buy it. You don't want to regret letting it get away.
Web Reference:  http://www.uterms.com
2 votes
Tman, , 30642
Mon Jun 16, 2008
John,

->>>> Realtors® pretending to understand finance are like carpenters thinking they can be brain surgeons. Just because they have the tools to do the job doesn’t mean they should be trusted with it.->>


OMG, with tears streaming down his face ..l.o.l.... :^))

Can I borrow that..?
2 votes
Jim Johnson, , 78233
Mon Jun 16, 2008
Interest rates are on the rise, and likely to keep rising. Inflation is likely to begin offsetting the decline in areas where property values declined, and I expect prices to at least stabilize if they don't start going up in those areas by the end of the year.
2 votes
Erin Stumpf…, Agent, Sacramento, CA
Sat Jun 14, 2008
Based on your other question, knowing that you are seeking roughly a $1,400 monthly payment - again I urge you to speak with a loan officer and have him/her break down a few different payment scenarios using different price points and interest rates. Rates trickle up and down on a hourly/daily basis. Your observation that they have trickled up a bit is correct, however they are still really low. Just to put things in perspective, when I bought my first house, the best interest rates were available in the mid-8% range about 10 years ago. Rates are still REALLY low historically speaking, and 6.5% is certainly nothing to complain about.

I suspect in your price range (just guessing based on the payment you desire), prices are near the "bottom" in the areas in Sacramento you probably want to live. Demand here has increased A LOT in the $250k and below price ranges, and we are seeing homes in nice areas and livable condition sell very quickly (within days of hitting the market) and with multiple offers.

I know the media here will lead you to believe that the market here is terrible, but in your price range that is just not the case...we are full of micro-markets here, and that is just not the case for what you will be looking for. Homes that hit the market in that price range are selling for MORE than the asking price, with 10-20 offers on a nice home...that segment is a seller's market right now with very little active inventory. You can read some market stats at http://sacramentorealestateblog.blogspot.com
Web Reference:  http://www.erinattardi.com
2 votes
Daniel, , Baton Rouge, LA
Thu Jul 10, 2008
being in california, some areas may continue to drop another 20 - 40%
1 vote
John the Bru…, Home Buyer, Connecticut
Thu Jul 10, 2008
Jim,

Why, it's the cheerleader's chorus. GTTB = "Good time to buy." Wish I could take credit for it.

-John
1 vote
Maria Morton, Agent, Kansas City, MO
Wed Jul 2, 2008
I remember when interest rates were 18%; can they go that high again? Maybe.
Should you buy now or later? Well, what is your situation? Are you renting now?
Would your monthly costs be less or more if you bought? What do you get for your rent? Is your rent low enough that you have other investments to increase your net worth?
Do you like renting? Would you prefer to have the rights that come with home ownership? Are you up for the responsibilities that come with home ownership? Whether to rent or own is such a personal decision. Maybe you could meet with a financial advisor and/or your tax accountant and attorney to gain their perspective on your particular situation.
1 vote
Jeff Ranta, Home Buyer, Sacramento, CA
Wed Jul 2, 2008
I honestly can't tell in your first post if your are agreeing with me or not but I guess since I don't have an 'informed opinion' I guess it is the latter.

So tell me JR, which is better 250k @ 6% or 230k @ 7%.

Personally I hope interest rates rise so homes will be cheaper. Higher rates, less buying power, the lower houses prices will be. Bring on the 10% rates!
1 vote
J R, , New York, NY
Wed Jul 2, 2008
I really wish "buyer experts" like yourself would work in our field for a while before they shoot their mouths off like the idiots they are.

----------------------------------------

So do all the "smart" people who bought in '05. Just because I didn't take the time to check the Pro box on my profile or pass the exam for a real estate license doesn't make me less "in your field."

~~~~~~~~~~~~
Did you ever hear the expression "walk a mile in his shoes". I don't care how many houses you bought and/or sold, or if you bought in 05 or 99. I was addressing Jeff's rant. I don't call what he posted an "informed opinion".
1 vote
Sue Archer R…, Agent, Palm Harbor, FL
Mon Jun 23, 2008
Cesar you bring up some great ideas....although we are straying from the original question...
I read the linked article...always fascinating to read a document from 2 years ago, and still appropriate today. According to Robert Kiyosaki (Rich Dad, Poor Dad), your home is not an asset. And while we could debate that, a home is necessary to live in, whether you rent or own...you need a place to live, which is why he lists it as an expense. I say, it can be a little of both, but you don't want to risk it by buying outside your means, as many have.

Buy a home now, if it's within your means, and it meets your living requirements. There are many bargains out there, I personally I believe in home ownership vs. renting in order to build assets.
I don't believe EVER in buying a house now, with the idea of refinancing in the future. Read Suzy Orman's philosophy (of buying down your mortage as soon as possible), or 'The Richest Man in Babylon' book, written in 1940 and STILL relevant.

We all need (all ages) some more financial education....so I appreciate this debate.

Sue Archer
Realtor, GRI, ABR, SRES
The Galster Group
(916) 847-9686
Web Reference:  http://www.suearcher.com
1 vote
Cesar, Home Buyer, Charleston, SC
Mon Jun 23, 2008
This lady discussed the topic 2 yrs ago. Good read.

http://itsjustmoney.blogs.com/its_just_money/2006/05/if_risi…
1 vote
Bill Eckler, Agent, Venice, FL
Mon Jun 16, 2008
J,

Buy now while the interest rates are low and negotiate your best deal. If you do your homework and negotiate well you'll be able to enjoy the low interest rates as well as the lowest prices........because we are near the bottom. You heard it here....................

.........."Don't wait, NEGOTIATE".......and buy smart!

Good luck,
The "Eckler Team"
1 vote
Jim Walker, Agent, Carmichael, CA
Sat Jun 14, 2008
Your question made two assumptions: 1st that interest rates will go up soon and 2nd is that home prices will fall further.

I agree with your assumption that interest rates are more likely to rise from todays level than to fall.
I think it is unlikely that values will fall by more than the 50% they have already fallen. Notice I said values - not prices - there are still some list prices on stale listings that are higher than they should be.
However those that are overpriced don't sell. It is the well priced houses that have been cut by 50% from the peak that are obtaining the multiple offers.

You should consider both price and interest rate. John makes an interesting point about being able to refinance at some future date, when rates drop. In order to refinance for a lower rate, you will have to 1. have equity 2. have qualifying income and credit at least as good as when you purchased.

A lot of people today are calling lenders trying to refinance out of negative amortization or readjusting loans only to find that they do not qualify for a rate redcution refincance due to negative equity and or insufficient income to qualify for a "new" loan.

If you really believe prices will drop further, in the face of increasing sales volume (though volume is still well below the bubble levels) and decreasing inventory (though inventory is still high by historic levels) you should wait. Wait, not because it is the best financial move for you, but because it is the best strategy for you emotionally. You see, you would be competing against the thousands of buyers out there who think the bottom of the market was this spring, they think prices have flattened, and that price levels will begin to rise in the coming year (s). You will be the underbidder, and experience repeated frustration. If you do win an acceptance, you will hate the escrow period, fearing that you are overpaying, now matter how badly you beat the seller up on price. The fear that you are overpaying may influence you to pull out of the deal during your due diligence / contingency rights period after you have paid for an inspection, and an appriasal. Though that is not as traumatic as getting cold feet after contingency removal, it still is significantly costly. Purchasing a home should only be done if you have a high level of confidence that values will at least be stable over the next couple of years.
1 vote
J R, , New York, NY
Sat Jun 14, 2008
Realtors® love to tout low interest rates. If it was the other way, and interest rates were high, they’d be screaming about the resultant low prices!

Let me let you in on a little secret. Interest rates don’t matter. Yep, you heard me right. They don’t matter.
~~~~~~~~~
Interest rates mattered plenty to all the buyers who got into those low rate adjustable ARMS in 2005. Why do you think there was such a run up in prices?
1 vote
Eric Bryant, , Long Beach, CA
Fri Jun 13, 2008
Mathematically on a thirty yr loan, Interest rates have more of an effect than price changes, Best of Luck! The Coach
Web Reference:  http://askPCR.com
1 vote
The_Bayou, , Newton, MA
Wed Nov 12, 2008
if you plan to keep your home for a minimum of five years you will most likely be fine...
-------
Where does that logic come from? There have been several ten year period when you would have sold for less than you bought. In the Northeast an example would be buying in the late 1980s and selling in the last 1990s. I certainly would not want to have been in a situation where I bought in 2005 and plan to sell in 2010. Financial advisors know not to give unsubstantiated hope to investors (don't worry, hold onto that Lehman Brothers stock for at least 5 years and you will be fine....especially with the price being so low now...) but real estate agents don't hesitate to do so.

Just tell people not to consider their house an investment, but rather a place to call home. There is nothing wrong with your largest expense being the place you raise a family.
0 votes
Joyce Davison, , 95476
Wed Nov 12, 2008
It is better to buy now instead of waiting for the "Proverbial Crystal Ball" to let us know what will happen to the interest rates in the future. While there are no guarantees, if you plan to keep your home for a minimum of five years you will most likely be fine, particularly with home prices being as low as they are right now.
0 votes
Paula Swayne, , Sacramento, CA
Wed Nov 12, 2008
GTTB - Haven't heard it abbreviated like that, so thanks for clarifying. Why did I say that I think all the answers will be the same? I can assure you, not to paint a rosy picture. The fact remains, as in the stock market or just about any other investment, if you try to time the market, you will usually lose out. You won't know when the bottom has hit until it starts going up,...then it is too late. Buy a home because you want to be a homeowner. Buy it because you are tired of not being able to do the things you want to do in your rental. Buy it because you don't want to live with your parents anymore. Sure there are costs such as property tax (1.25% in Sacramento County), insurance, upkeep, etc.), but your equity will build. In this climate, it might take a while. I wouldn't buy planning to sell in a year or two. Plan on at least a 5 year residence. Most Realtors will tell you this because they have experienced it. They have seen their clients, who made wise financing decisions, build equity and create a nice nest egg for themselves. So yes...buy now...the deals are still out there!
0 votes
Sue Archer R…, Agent, Palm Harbor, FL
Fri Jul 11, 2008
Lookyloo,
Not sure what you mean by 'escrow charges' but your CA property tax is set by the purchase price at the time of purchase. While prop 13 sets the tax at 1%, you're correct in that most use 1.25% in their calculation because of some local assessments that get added on.

Those that bought homes in 2006-7 are having their taxes reassessed. (anothe reason the budget still isn't passed again as the state revenues have declined from lower property taxes...) In most counties, they are reassessing automatically, but you can always ask for a reassessment if you're a current homebuyer who bought in the 'high' priced timeframe.

In other words, if as some here have predicted and the prices drop, so can your property taxes in CA, at least temporarily. (They can reset them back to the original price if the prices go back up, but they won't go beyond your original purchase price plus the small % adjustment that they make) Hope that last part didn't confuse you....
Web Reference:  http://www.suearcher.com
0 votes
Lookyloo, Home Buyer, CA Bay Area
Thu Jul 10, 2008
Great post (and responses)...I'm in a similar situation (albeit in the Bay Area), so all this info helps...
Probably will sound stupid, but I didn't notice anyone address property tax ramifications (if any). 1.25% of purchase price in CA. What about escrow charges? Can't think brain hurts. Please think for me. :)
Any ideas?
0 votes
Jeff Ranta, Home Buyer, Sacramento, CA
Thu Jul 10, 2008
'I like to not read the responses until I respond...then compare. In this case, I am willing to bet that ALL of the responses are....BUY!'

I rest my case.
0 votes
Jim Walker, Agent, Carmichael, CA
Thu Jul 10, 2008
John the Bruce, WTF is GTTB? as in "so many GTTB messages." ?

Go to the bank?

Gave to the Bruce?

Gee, That's too bad?
0 votes
Sue Archer R…, Agent, Palm Harbor, FL
Thu Jul 10, 2008
I had learned something new, that maybe others didn't know as well, so I thought I'd share...

When the FED keeps lowering the rate, (which is really the short term interest rate and not directly related to Mortgages), that has weakened our dollar against foreign currencies, and also increased the price of oil. Therefore, the FED is getting more pressure to raise rates right now. (I hadn't understood these factors before). That may or may not be a factor in unrest in the stock market.

The more unrest in the stock market, the more the bond rate is affected, which directly relates to mortgage rates.

With all of that said, none of us can predict where mortgage rates are going but expect them to go up. Supply and demand have more of an impact on home pricing than anything (which is why some areas of the country are so much more or less money for a home than others). The decision always has to be on affordability for your personal situation, and now even gas prices are going to affect that decision, not just home price and interest rate.

I agree that educating yourself is important when making such a big decision in buying a home, vs renting, but if you look at historical trends you ought to see this is a good market to buy...for quite a few people, in Sacramento. That's why, if you're buying a home under $300K, they are selling within 30 days. Just don't go in with the idea that you'll refinance later....bad idea.
Web Reference:  http://www.suearcher.com
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Paula Swayne, , Sacramento, CA
Thu Jul 3, 2008
Wow! Obviously, judging by the number of responses, there are definite opinions. I like to not read the responses until I respond...then compare. In this case, I am willing to bet that ALL of the responses are....BUY! In the better areas of Sacramento, the price drop is done. Land Park has been taken off of FHA's declining market list. I am sure East Sac and Curtis Park are there as well. In the "foreclosure neighborhoods", while there is plenty of inventory, I doubt that the price is going to drop much more...there is just going to continue to be plentiful selection. Interest rates are terrific! There is no downside to buying now. If you go after the foreclosure/short sale market, be prepared for lots of offers before you have a solid deal...it is just the nature of the beast.
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J R, , New York, NY
Wed Jul 2, 2008
Personally not only do I hope rates rise so homes are cheaper, I also hope banks make it harder to get loans, so homes are cheaper.

However, Jeff, once you start attacking people, whatever you say that follows is disregarded, true or not.
0 votes
J R, , New York, NY
Wed Jul 2, 2008
the economy is tanking, there are no more neg-am, liar, interest only, no-doc loans available and suddenly in a couple months the housing market is just going to rebound just like that? You're dreaming. I swear that Realtor's are all zombies brainwashed by the NAR...
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Jeff, your last name is so appropriate for you.

This is exactly what I tell my prospective sellers when they tell me how things are going to turn around "after the election" "in the spring" "after the new year" or whatever idiocy they try to justify the price they think their house will sell for. Oh, is President Obama going to buy up all the inventory? Is President McCain going to order the banks to give out 1% 3 year adjustable neg am loans? And even then, your house has lost 20% of what it was worth TWO YEARS AGO... do you think it's going to make a sharp u-turn UP?

I really wish "buyer experts" like yourself would work in our field for a while before they shoot their mouths off like the idiots they are.
0 votes
Maria Avdalas, , Sacramento, CA
Wed Jul 2, 2008
Money Magazine predicts that Sacramento will turn after February 2009. The top econimist with the National Association of Realtors predicted by the end of the year. Even if prices do drop another 10,000 to 15,000 dollars you will pay much more than that with a higher interest rate over the life of your loan. I would negotiate the best deal you can right now and take advantage of the low interest rate.
Web Reference:  http://realtyaid.net
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Bonnie Kehl, , Los Altos, CA
Thu Jun 26, 2008
For many people hoping to refinance later got them to where they are now. Nobody really knows what is going to happen. All I said was if you are financially able to purchase a home, this is good time to buy because rates are low, housing prices are low, and there are many to choose from. Sacramento market maybe different, however, do the math. For last 23 years I have been selling real estate, I have watched people priced out of the market. They still are.
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Bonnie Kehl, , Los Altos, CA
Wed Jun 25, 2008
I would recommend buying a home while the interest is low. While you are waiting for the home prices to go down, interest rate can go up and home prices may start going up. Home is an investment but also a place to call a home. If you are planning on living in your home for at least next fieve years and you are ready emotionally and financially then it is a good time to buy. Rates and the home prices are great right now. Take advantage of it now. Even if the home prices go down some more, if the rates go up, then you are where you started from. NO WHERE!!!
0 votes
Tman, , 30642
Tue Jun 17, 2008
Not to worry, I'm sure I have enough for 3 people .l.o.l...
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Erin, , South Lake Tahoe, CA
Sat Jun 14, 2008
Dear J--I can only speak from my own and my client's experiences. In 2007, we made the only offers received on our purchases. Even though the value of those homes has declined some, interest rates were about what they are now and we were not stressed out by the other 10 offers that we see on homes today. Basically, the demand is higher now, the supply is dwindling which is making for some stressful situations for buyers. Why wait until it gets even more stressful. Buy now -- don't wait, unless you'll need to sell in the next three years. I think you'll look back at when you bought on the market condition graphs (see my Website SoldByErin.net for today's market condition) and say, boy, I'm glad I bought when I did.
Web Reference:  http://SoldByErin.net
0 votes
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