We moved from Baltimore to Miami during that time and we were able to sell our home because of an assumable mortgage. We had “credit card” rates and refinanced as the interest rates came down and new mortgage instruments were introduced – adjustable rate mortgages. As you can imagine, the economy was extremely slow during the period of high interest rates. However, People still moved, new homes were still constructed and buyers still purchased their new home.
What is the incentive for a first time home buyer to purchase a home today?
The housing market is reported every day: foreclosures, short sales, historically low interest rates, over supply of homes, high unemployment, and prices continue to decline. First time homebuyers do not have to move. They will buy their first home only if they want to.
The first time homebuyer doesn’t understand that buying a home is a place to raise a family and establish your sense of community. Most now think because of the national media coverage that buying a home is an investment. It is an investment because the long range appreciation of homes out paces other investment opportunities. However, buying a home as an investment seems to be the only reason to buy a home. Today’s buyer is thinking investment. Thus, they are trying to judge the bottom of the market.
If you were a first time homebuyer, would you buy today or wait?
What will be the reason for a buyer to jump off the fence?
If interest rates started to trend up and continued to the normal range, many first time homebuyers really would miss out on an opportunity because their purchasing power will be drastically reduced. What they could afford in a sales price will go down as their monthly costs go up.
The challenge today is that our economy is not improving with energy even with low interest rates. What will happen to our economy when interest rates start to trend up? Plan for the worst and expect the best!
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