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Friday, April 11, 2008

Buy Now in Daybreak?

Many potential Daybreak home buyers are sitting out on the sidelines waiting to see what happens to the housing market. Will prices fall? Probably. If the home you are looking to buy is over 300,000, then you might consider waiting a little longer. The market for homes in that range is definitely trending downward. However, if the home you are looking to buy is under 260,000, then I suggest that you move forward and purchase your Daybreak abode soon. Now is the time to buy for three main reasons. First, many of the home builders are offering incentives that will definitely give you a boost in your purchase. Some home builders give 10,000 to put toward closing costs, upgrades, or to cut down the selling price of the home. An agent I know from one home builder said they would finish the basement of the home for free in addition to incentives already put in place. Another reason is that the market for homes around the 260,000 range and below will stay strong because people can afford these homes, especially the condos. That is the one area of the market that is not suffering right now. The third and final reason is the most compelling.

An article in TIME magazine aptly titled "Ignore the Headlines" illustrated this reason well. Essentially you could buy now at a possibly higher price, but get a lower interest rate. The alternative is to buy later when the price is down, but the interest rates have gone back up. More than likely you will be paying the same monthly payment.

"The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher," says Jim Svinth, chief economist at mortgage firm Lending Tree. So anything you gain by a further drop in prices might be offset by rising financing costs."
Another trend that suggest interests rates will go up is inflation. Oil prices are at record levels which drives up the cost of just about anything that has to be transported (food, goods, building materials). Food prices in particular are rising at a rate which has prompted several news stations to monitor a "basket of goods" to report rates of local inflation. When inflation goes up interest rates go up. Click on the graphic on the left for a graphic comparison of buying now or buying later. With inflation rising and a possible economic recovery home loans will definitely get more expensive.

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