30-year mortgage rates are near 8% with excellent credit. Interest rates have climbed for the past three months straight. The Fed is considering another interest rate increase for November and December, possibly pushing rates up to 8.5% or even 9%. The reasoning is that higher interest rates will "slow down inflation".
Home sales are at a 13-year low. Factor in the higher cost of insurance and the fact that property taxes are going up to unaffordable levels and the very high cost of labor and materials for home construction... and you have a real estate market that's going to crater.
I personally know several homeowners that had their homes listed for sale, but have removed them from the market in the past 2 months. They will wait and hold on to what they have for now. One real estate agent mentioned to a couple that they should keep their house off the market until at least middle of next year and then decide based on market conditions.
I'm suggesting that the U.S. economy is a three legged stool... and one of those legs is housing and private & commercial real estate. If it fails, the economy goes into a deep recession at best.
Buying a home now is not a bad strategy. Prices have fallen 20-30% since the peak. The strategy to use is buy based on a payment you can afford and use an FHA loan which only requires a 3% down payment. All FHA loans qualify for a Streamline Refinance with no appraisal or income qualifications as long as the previous 12 months of payments have been made on time. You cannot have a drastic drop in income but other than that it is a slam dunk. Just remember that an FHA loan can only be made by a HUD approved lender so many brokers can't offer FHA loans.
Licensed real estate agent here (licensed in 2 states) and both areas where I’ve practiced my business has not seen a decline in prices at all. In fact, my aunt just sold her home for over asking price, and she listed it high in the first place. I will say, there was a lull in the market about a year ago, but came back strong earlier this year. Homes were sitting on the market a little more than average, but not much, like 30 ish days. But it’s probably different in other parts of the country.
You also have to pay PMI for the life of the loan.
It's really nice being a veteran and not having to do any of that. No PMI, no down-payment - I see that as my only veteran's benefit that is worth it. Any vet that is honorably discharged can get a VA loan.
That's great and something I did not know. I know a lot of the vet medical care is criticized by many but my BIL is very happy with it. Thank you for your service BTW!!
FHA loans use MIP rather than PMI. It is a much lower rate and can be dropped in a refinance once the property has appreciated. Any loan with less than 20% down requires Mortgage Insurance so a purchase today will see an opportunity for refinancing to a lower rate in the future and when rates get lower property prices appreciate since more buyers enter the market.
MIP, you are correct. But unless you put 10% down on FHA purchase you have to pay MIP for the life of the loan no matter how much it appreciates. If you put 10% down you can be rid of MIP in 11 years. EDIT: You could always refinance but who wants to do that at 8%?
My point about refinancing is based on the fact that rates will swing significantly lower in the next few years. When rates decline prices will increase so chances are you could get a 3% decrease in rate and might even get a conventional loan at less than 80% LTV so no mortgage insurance. The younger generations most likely won't stay in the home for 11 years total based on history.
Found the realtor!
I left real estate in 2003 because of all the fraud that led up to the 2008 crash. I continued in lending and teaching for a few more years in hopes the fraud would be stopped but quit the whole thing because it just got worse. My mother was a real estate broker for 50 years.