Why Buy Now?
Articles like Friday’s San Jose Mercury News article on plunging home values will surely cause many buyers to put their plans on hold. If they are looking to buy in one of our better areas, that could be a mistake.
With record low interest rates and prices back to roughly the 2004 levels, opportunities abound for courageous home buyers. The trade up market (typically $1.2m to $2.2m) has been particularly hard hit by the sudden change in lending guidelines. This is the price range where the most of the better buys exist.
For the past twenty years buyers have easily been able to buy first and sell later as most banks only required buyers to qualify on the new mortgage, not both – but no more. In addition, buyers could take out 10% of their new purchase price from their existing home, via a credit line, buy the new home with 10% down, get a second loan of 10% plus a normal 80% first mortgage, then pay off the 10% second when they sold their original home – but no more.
Now, unless buyers are willing to sell first and move twice, the best way to trade up is the old fashioned way: by buying contingently upon the sale of their current home.
Agents, buyers, and sellers all have to relearn this buying technique. Until they do, demand is low and great deals are available in the “trade up” price ranges.
Jeff and Steve