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Why They Are Saying to Buy A Home Now?

June 14, 2011

The Price of a home versus the Cost of the home is often a calculation over looked. Our friends at Keeping Current Matters touch on this and bring 4 articles that all talk to the point that this is the time to buy. Why They Are Saying to Buy A Home Now?…

Despite what appears to be a non-stop wave of tough news regarding real estate, four major media players have come out this month with the same advice: It Is Time to Buy a Home! Here are the four articles and a breakdown as to why the advice makes sense.

The Wall
Street Journal
: Why It’s timeto Buy

CBS Money Watch: Why the Timeto Buy is Now

Forbes Magazine: 9 Reasons toBuy a House Now

National Public Radio: For Many, It’s Still a Good Time to Buya Home

With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.  Interest Rates Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards

The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things
will happen:

  1. The qualification process for loans will become more difficult
  2. The cost of a loan will increase

Bottom Line

There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).

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