Sunday, January 10, 2010
A Perfect Storm for Home Buyers!
Real Estate Weather Alert! The combination of LOW LOAN RATES, LARGE INVENTORY of homes, and a federal TAX CREDIT has created a Perfect Storm for potential home buyers!
If you anticipate buying a home in the next 6-12 months, DON'T WAIT! Here's why:
1) Interest rates are at generational lows that greatly improve the affordability of homes. Interest rates are bound to rise, and most experts predict that it will happen sooner rather than later. A difference of just 1% (e.g. 5% vs. 6%) on the loan rate for a $400,ooo home can cost you over $250/month. Not so much, you say? Over the course of a 30 year loan, that translates into an additional $90,330!
Put another way, if you can afford a $300,000 house at 5%, you will only qualify for a loan of approximately $270,000 at 6%. That might translate into one less bedroom or no garage or no updates to the home.
2) High inventory of homes. We are currently in a "buyer's market." That means there are more sellers than there are buyers, so by the economic law of "supply and demand", buyers have the upper hand. This has contributed to a decrease in home prices and more bargaining power for buyers. In other words, there are many wonderful and affordable homes on the market from which to choose.
3) In an effort to stimulate the economy, the federal government is offering homebuyers a tax incentive. Most first-time home buyers (anyone who hasn't owned a home in the past 3 years) are eligible for an $8,000 tax credit and current homeowners may receive up to $6,500. That is a tax CREDIT, not a tax deduction. The difference is that a tax credit is directly deducted from the amount of tax you owe at the end of the year. If, for example, you owe $7,000 when you file, you would only need to pay $500! If you don't owe any income tax, you would receive a check back from the government for up to $8,000! (Please give me a call for more details on restrictions, but they really are minimal.) BUT THIS CREDIT ENDS APRIL 30, 2010.
So there you have it! A Perfect Storm for home buyers from now until April 30th. Give me a call at 206-708-9800 and ask me how I can help you take advantage of it.