Housing Double Dip? O-V-E-R R-A-T-E-D
Housing Double Dip? O-V-E-R R-A-T-E-D
First time home buyers are undoubtedly a little concerned that we may be experiencing a double dip in housing prices.
In fact one "expert" said: "you may get a big discount by waiting a year [to buy]," said Dean Baker, co-director of the Center for Economic and Policy Research.
You know what, he's right IF YOU'RE PAYING CASH!
But for those of you who need to get a first time home buyer loan, I'm going to have to respectfully disagree.
The automobile dealers figured this out a long time ago. They know their product is going to go down in value the minute you drive it off the lot, yet they still manage to move inventory every year.
One reason they're able to do that is because they have made renting a car cheaper than buying one. The monthly payments on a leased car are significantly less than they would be if you bought that same car, so more and more people lease cars than buy, and what do they have to show for it at the end of the lease? Zero, Zip, Nada, just a bunch of payments made and "their" car is back on the dealer's lot.
Would you buy a car rather than lease if the payments were lower?
Why wouldn't you?
In many real estate markets across the country, it's actually cheaper to buy a home than rent one. So with all the first time home buyer programs and first time home buyer incentives now may be a great time to quit paying your landlord's mortgage. We know cars are going to decrease in value but whether or not houses will is only SPECULATION!
That being said, let's look at some real numbers and you can decide how much "discount" you get from waiting.
In a couple of earlier posts, I examined this issue:
What is the real cost of waiting for first time home buyers?
First time home buyers it's your money on the table
So, lets assume the "expert" is right and home prices do decline by an additional 10% this year. You can now buy that $200,000 home for $180,000. You would save approximately $40,947 over the course of the 30 year loan.
But that also means you've rented for another year, which (at $1500/mo) you've spent $18,000 with nothing to show for it other than a big smile on the face of your landlord. So, now your net gain is $22,947.
FHA has already announced that they will be increasing their MIP premium by .25% on April 18th. So, waiting will cost you an additional $10,068 in increased borrowing costs. Net gain: $12,879 (starting to see a trend?)
In the last five months interest rates have risen .75%, if that trend continues over the next year, you would pay an additional $30,395 in interest, so now your Net Gain has become a Net Loss to the tune of $17,516.
Like the so called experts, these numbers are hypothetical and not likely to get as much press as those from the "think tanks", but they're as realistic a possibility as the "double dip", and worth your consideration.
After all it's only money: YOURS!
Evaluate the Exact Price of Required Housing Property with Beneficial Property Listings! How the Housing Shortage Is Affecting Land Prices Increase Space with Warehousing Copper LED Headlight Housing New Monthly Housing Scorecard Introduced by HUD Demand for Housing Rockets in February Seeking Refuge in the Housing Numbers The Advantage of Modern Housings Popular Modern Housings for Modern Filipinos Housing fair 2011 in Italy: a moment for meeting and grow New Housing Drop Dummies' Guide to NYC Low Income Housing Dealing With Housing on Short Stays