Spring could be a great opportunity for those that haven’t yet taken the jump into homeownership. The recent S&P/Case Shiller Home Price Indices revealed 11 markets, including Chicago, have hit new housing price lows – even lower than those of 2009. As the spring 2011 home buying season starts, this could be the last time in a while to get a steal on the market.
Why are home prices in the area continuing to fall?
Home prices in the area continue to fall for a multitude of reasons, one of the leading being the hesitancy of qualified homebuyers to reenter the market. While many economists have predicted we are in the recovery phase and will not take another turn for the worse (i.e. “double-dip recession”), many Americans are still weary it could happen. This fear of the unknown is leaving many potential homebuyers on the sidelines waiting patiently trying to find the market bottom. This causes a chain reaction – if no one buys, home prices go lower until someone does.
What about mortgage rates increasing?
Thirty-year fixed mortgage rates have increased from its generation lows of less than 4 percent in the past year to 18 months. Once again, this is due to the economy. As we move back into economic stability, the government will continue to monitor and set interest rates. That being said, qualified homeowners can still get a 30-year fixed rate mortgage at less than 5 percent. Even at 5 percent, these rates are still considerably low compared to five to 10 years ago.
Should I wait now?
As we continue to move further into economic recovery, it is hard to predict what will happen. The past two-plus years have been a buyer’s market. As the economy recovers and mortgage rates increase, the time might have passed to get the most optimum deal. However, with home prices in Chicago falling to new lows, this could be one of the last times in a generation to have this combination of low home prices and fairly low mortgage rates.
What is my first step?
The first step is education – educate yourself about the homeownership process. The National Association of Realtors has timely information for those looking to enter homeownership for the first time, or for those looking to re-enter homeownership. Many banks today have tips and mortgage calculators on their sites to determine how much a home you can actually afford. Talk to a licensed mortgage banker to determine what opportunities you have. Homeownership is a big step, but arming yourself with the proper tools is a first step in the right direction.