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Bargain Hunters … Buying a house now may be your best investment!

 

Bargain Home Hunter

 The distressed Michigan housing market should get a lift this spring as bargain prices and favorable interest rates lure prospective buyers out of hibernation. Tighter lending practices however, means no one should expect the boom days to return any time soon.

 SPRING HOUSING MARKET ALMOST HERE

Spring is a pivotal season in the housing market in the Canton, Michigan area and in the Detroit metropolitan suburbs in general. Potential buyers typically emerge from a winter hiatus and shop in earnest for a new home or an investment. The strength of the market in March, April and May usually sets the tone for the entire year.

 This year, spring has assumed even greater importance as our ongoing Michigan economic slump couples with a sharp U.S. economic slowdown. The U.S. slump by many standards has been triggered also by a slow country wide real-estate market.

After sales of existing homes in Canton, Plymouth, Northville, Novi and surrounding cities sank almost 11 percent last year, a housing revival could help our local economy get back into revival mode.

 When the housing sector is thriving, so does the economy as buyers spend heavily on new appliances and furniture while owners pump cash into remodeling or additions.

 In many areas, the choice of homes on the market has increased considerably, with unsold inventory double the typical supply as foreclosures mount and sellers hold out for higher bids

 Indeed, possible buyers are already coming out the woodwork seeking deep discounts.

 Signed contracts that have yet to close were higher in January than any month in the prior six. While we’ve seen quite a bit of increase in traffic, a lot of people are shopping for deals right now.

HIGH HURDLES

 But the roadblock to closing the contracts is ominous.

Many lenders are shutting down the money pipeline to all but the most credit-worthy borrowers, looking to avoid repeating mistakes that led to the current wave of bad mortgages.

While a flurry of sales this spring may highlight the pent-up demand in the market, it probably would not signal a sustainable housing upturn this year.

Still, demand is stirring as sellers grow desperate to off-load properties. Fixed mortgage rates are low, and some home prices are looking too attractive to pass up.

Bidders are emerging for foreclosed homes and for so-called "short sales" at sharply reduced prices. In a short sale, the lender agrees to take a loss and avoid foreclosure costs if the borrower is unable to command a sale price that will pay the remaining mortgage balance.

Meanwhile, the average 30-year mortgage rate is around 6 percent. That’s up a half percentage point from four-year lows set last month, but it’s roughly a quarter point less than a year ago, based on data from Freddie Mac, the second-largest U.S. home funding company.

NEW GOVERNMENT STIMULUS SHOULD HELP

A new government stimulus package will likely also open the doors for more buyers. It temporarily raises the size of mortgages that can be purchased by Freddie Mac and Fannie Mae, the No. 1 federally chartered home funding company, making some lenders more inclined to approve home loans.

Additionally an expected new rate hike by the Fed that is rumored to take place in March will undoubtedly create more downside pressure on rates.

If people have a good track record of paying their bills, the loans are there. But those kinds of buyers seem to be scarcer today than ever before. Even a few late paid loans are enough to lower a credit score to a level that turns away many mortgage companies.

Even if you talk to people who refinanced recently, a lot of them are finding that the banks are asking a lot more personal and critical questions. There is no doubt It’s more troublesome to get a loan these days.

BUYERS MARKET

In spite of all the above I think this is the best buyer’s market that has existed in a long time. There are tons of inventory, great interest rates and the prices are back in line to where houses are decently priced again. In fact I would consider many houses on the market to be at rock bottom prices now.

If you are currently renting this could be the best time to buy than has existed in a long time. Even if you own a house and wish to move up, this might still be a great opportunity. While taking a loss on your current house may not be savory, the gain you’ll get on the move up house may be much more than the loss on the old one.

Lee Bittinger