During this time of year, a lot of sellers and buyers, are deciding that with the Holidays upon us, they are going to put off the “move” until 2014. Adding to the delay, is that interest rates are about 1% higher today, than they were this time last year – so there is some hope that, maybe, they will move lower.
I wanted to point out a few reasons, why you may consider making the “move” now, instead of waiting:
1. The Fed will eventually start to taper the stimulus we’ve seen in place since 2009. This stimulus, known as quantitative easing, is the program where the Federal Reserve is buying billions of dollars in mortgage bonds each week, in an attempt to stabilize the economy. A side effect of this buying spree, is that rates have dropped to record lows. That program could go away at any time, and when it does, interest rates will rise. Last June, when the Fed hinted at tapering the stimulus, interest rates shot up by 0.5% is just a couple of days.
2. Home prices are rising – in the Denver market, we are seeing the 2nd consecutive year of double digit gains. Depending on the report you read, values are up by more than 10% in the last 12 months. This is a replay of what we saw in 2012 also. As home prices go up, your purchasing power goes down. When interest rates rise as well, the effect can be exponential, and leaving some buyers regretting the decision to wait.
3. While higher home prices may be great if you’re a homeowner looking to sell, it’s not so great if you’re a home buyer. In Denver, we are continuing to see record low inventory, and fast contract once homes hit the market. This low inventory, in combination with high demand, rising prices, and rising rates, is creating a perfect storm, and can create some major challenges for home buyers.
4. The new Dodd-Frank reform is being instated in January. Mortgage lending became much stricter after the housing market crashed, but the new Dodd-Frank reform will make it even more difficult to qualify. This reform, which dictates that borrowers must meet eight criteria to qualify for a loan, will go into effect in January 2014. So, you may want to get approved and buy a home, before this new reform becomes law. We are seeing the early signs of this already, with Fannie Mae doing away with the popular 3% down loan program on November 15th. We still have access to the CHFA 3% down loan program, but no everyone can qualify for that, as there are income limits for the borrowers.
So, while it may be tempting to wait and see if interest rates drop further, or put things off until after the Holidays, you may be better off looking for a home to purchase, sooner rather than later.
Call me with any questions, or to get the pre-approval started, I would love to help. With our Certified Pre-Approval, and super fast closings, we can get you into a home before 2014!