Should I Stay or Should I Go?
by Michael Fidanza
As a Realtor, a question I am constantly asked by family, friends and people I meet is “How’s the market?” Many are just curious in general but some ask because they may be interested in buying or selling a home. For them, depending on their position, I have different answers because their personal motivation is a key factor in helping them accomplish their goal.
When I speak to someone who is serious about buying or selling now or in the next few months, certain external factors have a strong impact on whether a buyer can afford a home or a seller gets their home sold. Today, I am refering to the Federal Housing Administration (FHA).
The FHA insures many home mortgages and insured around 16% of all mortgages last year alone. Lingering aftershocks of the housing crisis over the past few years have taken its toll on the FHA forcing the possibility of a taxpayer bailout for the first time in their 78-year history.
To offset the FHA’s losses, a program of premium hikes and rule changes that could affect buyers for years after they buy a home may be enacted. Sellers need to be aware that if these changes take place, some of the buyers who are currently looking in today’s market may have to sit on the sidelines a little longer.
The second external factor is the Federal Reserve’s current fiscal policy known as quantatative easing, round 3 (QE3). Specifically, since September, The Fed has pledged a monthly purchase of $40 billion of mortgage bonds until early Spring 2013. Their belief is that the fragile housing recovery in 2012 will be in a better position next year to stand on its own. At that time, we will likely see 30-year mortgage rates rise above the 4% mark for good.
Is this bad? Not necessarily but it means that some buyers won’t be able to afford more house for the money and may have to settle for less.
Depending on whether you are buyer or seller, these two major factors will play a part in your personal strategy. For buyers, the mortgage will start to rise, as will home prices. Sellers, if you’re waiting for 2006-07 home values to return, the trend is pointing to 2016-18.
So, should you stay or should you go? If you’re serious, don’t ponder too long or you will be leaving money on the table.
links for the post:
https://money.cnn.com/2012/11/16/news/economy/fha-bailout/index.html
https://articles.chicagotribune.com/2012-11-30/business/sns-rt-us-usa-fedbre8b0016-20121130_1_treasury-purchases-kocherlakota-bond-rates