To Buy Or Not To Buy
That is the question a lot of potential investors are considering as they’re seeing sales prices stabilize, bidding return, and discounts diminish, weighing it all against the likely rise in mortgage rates this year. Is it that time?
According to a piece in the New York Times, most economists are indeed predicting higher mortgage years by the end of the year, and are eerily unanimous in their attitudes about the market. From the current 5 percent, the rate is expected to go up in late March as high as 6 percent for a 30-year fixed-rate, according to the chief economist at LendingTree.com. The chief economist for the Mortgage Bankers Association is a bit more conservative, predicting no more than 5.5 percent. The expected rise will be due to two factors, according to the article: on the one hand, the Fed is about to run out of the $1.25 trillion set aside for mortgage-backed securities from Fannie and Freddie. On the other hand, interest rates usually follow the long-term economic outlook, and most economists now believe we’re starting on a slow recovery.
LendingTree.com also broke down the probability of recovery by state, taking as their measures the average mortgage payment to average income and contrasting that with the unemployment rate. New York, as a state (New York City was not separated) doesn’t fare too hotly: although the state’s unemployment rate of 9 percent is slightly lower than the national average of 9.7 percent, the average mortgage payment constitutes around 34 percent of the average household income. Compared to that, buyers are slightly better off in Connecticut, where the debt to income ratio is only 24 percent.
Overall, foreclosures are expected to flood the market with inventory through the summer, keeping overall prices low. The chief economist at Moody’s Economy.com tells potential buyers to go for it, if they really like the place, but admits that they may not be buying at a bottom–his prediction is a further 8-percent slide and a bottoming-out by the end of the year, to average a 34-percent discount to the spring 2006 peak. Furthermore, he thinks it will be a “number of years before prices really start to rise in a normal way.” Then again, what’s normal, seeing the race to the top of this past decade?















