Are Home Buyers In For A Rough Time?
The real estate market is poised to go in a number of directions at present and every analyst seems to have a different perspective on that direction. We are in a rather unusual position nationally, one that has rarely been encountered in the past. Some areas are seeing improvements in both prices and stock reductions while others are seeing the reverse. The general consensus seems to indicate that future buyers may struggle and that rental markets are set to boom well beyond current levels.
There are a number of issues that are affecting the real estate sector at present. One of the most important over the next 12 months is the Federal government’s desire to get out of housing. This will see down payment requirements rise to at least 10% with some analysts predicting that 20% could become the norm. Add to this rising interest rates and tight loan qualification criteria and buyers could be trapped in the rental market, unable to save that all-important 20%.
The flow on affect of this will be a lowering of demand and a subsequent fall in home prices, and perhaps more people suddenly finding themselves with mortgages greater than the home price – that is what started this rot in the first place. Now is a reasonable time to buy if you have a substantial deposit, and buying a foreclosed home will at least provide an instant positive equity situation plus a buffer against future price drops. For investors, buying potential rental properties could see good returns over the next three to five years.
It’s a tricky situation, however. If predictions around future down payments are right, buying now with a lower down payment may be the only option. In what is an interesting scenario, if buyers did hit the market now with that philosophy, increased demand may just stabilize the market and prevent that outcome from occurring. That’s one of the foibles of the real estate market.
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