h1

Getting Closer to a Buy

December 15, 2008

Bill Ransom   Founding Partner

Bill Ransom Founding Partner

We are in a buyers’ market.  What’s more, it’s a market that is going to induce more than a few forehead slaps five or 10 years down the road after the financial crisis has ceded and housing prices have recovered. 

We can hear the laments now: “Why didn’t I buy when prices were low?” Of course, many people are still waiting for a bottom, which is only human nature. 

Are we there yet? We don’t know because bottoms are only confirmed with the benefit of hindsight.  What we do know is that bottoms nearly always form when people are most pessimistic.   If you read the headlines, you know there are a lot of pessimistic people out there.   

If you are a buyer though, you should be optimistic: Housing prices have fallen drastically from their peak levels in many areas of the country.   Rates on 30-year fixed-rate mortgages are close to 5.5%. 

First-time home buyers should be particularly optimistic: There is no house to sell, many sellers are willing to aggressively negotiate, and the federal government has provided a nice little incentive to take the plunge – a $7,500 tax credit that works like an interest-free loan. 

That Congress is showing signs of bailout fatigue might be another reason for optimism.  In fact, it might be in our best interest if the Treasury Department bailed out on its plan to drive mortgage rates down to 4.5%.  The intentions are good, to be sure, but increased uncertainty has been an unintended consequence, pushing many potential buyers to the sidelines in anticipation of lower rates. 

A bailout on that bailout would remove that uncertainty, while a reduction in bailouts in general would signal that markets are getting healthy enough to go it alone.    

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: