Whether a first-timer or seasoned home buyer, your home buying and selling process can be as challenging as learning a new language. Before you make your move, it's important to first understand the steps involved and the buzzwords of the "deal" to ensure the smoothest transaction possible.
With more than 10.4 million people planning to buy a home in 2009, according to Scarborough Research’s 2009 Multi-market Study, a little less than half followed through with their plans. Some failed to sell their current homes or meet stricter loan qualification standards, some lost their jobs, and some simply got cold feet.
But those negatives benefit anyone planning to buy a home in 2010. When the market is skittish, prices and terms improve. Who benefits the most? Buyers with good credit, jobs, and the decision to buy now.
The overwhelmed Federal Housing Administration has announced changes to its policies that will take effect mid-year 2010. First, the mortgage insurance premium will rise from 1.75% to 2.25% of all FHA-insured loans. Buyers must have a minimum FICO credit score of 580 to qualify for a conventional 3.5% down loan. Last, seller concessions such as paying for buyer’s closing costs will be reduced from six percent to three percent of the buyer’s loan. See: Hud.Gov
These proposed changes could galvanize buyers, along with first-time and move-up buyer tax credits, due to expire April 2010.
In addition, prices are bound to attract buyers. The National Association of Realtors (NAR) 2009 Profile of Home Buyers and Sellers found the median prices of homes purchased in 2009 were nine percent lower than in 2008 and that 95% of those who financed purchased with a fixed-rate mortgage.
Interest rates are expected to rise, but so far, falling stock prices and other economic jitters is keeping mortgage interest rates lower than expected. Right now, qualified buyers can still get a 30-year fixed rate loan around 5%.
So who is in the market for a home? Borrell Associates research says that the following demographics describe your next home buyer:
Average Market Household Income: $73,970
Average Market Household Size: 3.7
Average Age: 39.5
Average Value of Current Owned Home: $285,388
Average Years in Current Home: 8.5
Courtesy: Borrell Associates, copyright 2010
And this buyer, a confident homeowner with equity and income, is looking for good deals. As evidence, consider what’s happening in California, one of the hardest hit states during the housing “correction.” In December 2009, the state’s housing sales increased 1.7% and the median home price increased 8.4% over December 2008. Despite one of the largest inventories of foreclosed homes, California is down to a 3.8-month supply on hand, according to the California Association of REALTORS®. A balanced market is widely believed to have six months of inventory on hand.
Bulletproof markets like Texas, which largely skipped the housing bubble, are starting to soften. Job loss has increased unemployment from 5.6% in December 2008 to 8.3% in December 2009. That’s still well below national unemployment of 10%, which means well-priced homes are going to be even more attractively priced.
The upshot is competition is heating up among buyers for entry-level and move-up homes and inventories will continue to be tightest in the conforming loan ranges.
If you’re a qualified buyer, now’s a great time to buy a home.