Fortune Magazine posted a really good article about the critical element to a recovery of the housing crisis. The king pin to the whole deal is THE FIRST TIME HOME BUYER. Why is that, you say?
"The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses. But when the first-timers are absent, the entire buying chain gets frozen."
Since the mortgage melt-down, it has become tougher and tougher to get loans. And for good reason, since the cause of the debacle was loose lending practices. But without those first time home buyers getting new loans, the whole system shuts down. But if you have reasonably good credit and can afford a 3% down payment, you're in luck. FHA, The Federal Housing Administration is underwriting loans at a record pace right now.
But there is another dark character looming in the wings. It's called Inflation. Anybody notice the price of just about everything going up? And it's not just at the pump. Believe me, you and I will feel the effects of inflation long before the federal government says we have a problem. But guess how the Fed fights inflation? You guessed it, they raise the interest rates. This in turn will be disastrous for the housing market, because it will scare away the already nervous buyers.
So here's the bottom line. Right now really is a perfect time to buy real estate. All the planets are perfectly lined up--large selection, low prices, and good interest rates. As soon as interest rates go up (and this crystal ball says they have to go up) the whole game changes. So if you're in the market for a home, you better get moving, cuz the times they are a changin.
Fortune: On The Path to a Housing Rebound
Saturday, July 12, 2008
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