Buy now to save dollars later

Have you been thinking about finally buying a home? or even about making that long awaited move up step?  You should not wait any longer for two very important reasons: home prices are finally starting to move up – and interest rates are moving up too – although not as quickly as home prices. 

For instance, the closely watched S&P/Case-Shiller index report has noted home prices over the summer posted its biggest percentage gain in more than two years. However, first time home buyers have responded by sitting on the sidelines. In October 2012 the share of buyers purchasing their first home dropped to 34.7%, the lowest point in at least three years, according to a survey of real estate agents. This compares with 37.1% in June and the 40% range it has historically hovered around.

The decline comes as the sale of non-distressed homes has risen rapidly during the past year. It climbed to 64.7% in October, compared with 55.7% in February, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Current homeowners and even investors, which typically target heavily discounted foreclosed properties, have been riding the recovery wave. In October, current homeowners made up 54.2% of non-distressed sales, a jump from 50% in June. And investors made up 12.2% of sales, higher than 11.3% during the same period. 
By contrast, first-time buyers fell behind. Their share of purchases fell to 33.6% from 38.7%

A recent survey showed that 3 out of 4 future home buyers (who are not first time buyers) plan to move up to some form of a ‘better’ home. The breakdown:

  • Move to a significantly bigger home (49%)
  • Move to a nicer home (17.5%)
  • Move to a nicer part of town (8.6%)

If you or your family falls into any one of these categories, you should strongly consider making the move sooner than later. The ‘cost’ of your new dream house will be determined by two factors: the price of the house and the mortgage interest rate. Both are projected to increase this year.

For example, home prices in Montgomery County went up by 5% last year, and the Mortgage Bankers Association,  predicts that the 30 year mortgage rate will creep slowly up to 4.4% in 2013, after reaching record lows in 2012.

Now is a great time to buy that first time home or the move up dream home! The bad news is that the longer you wait, the more it will cost.