Wednesday, January 13, 2010

Is 2010 the perfect year to buy the perfect home?

While all the signs point to a continued buyer’s market, some common sense, financial stability and planning will make buying a home affordable.

The word on the street is that 2010 will be a prime year to purchase affordable real estate. Considering the stresses of the past few years, good news is always welcome. However, buying a house this year should be a thoughtful, planned process and not a decision to be made because of an array of incentives. Those incentives last for a year or so, and your mortgage lasts for 30 years.

Home values have reverted to 2003 levels, fixed mortgages are at near record lows, and foreclosures continue to rise, especially in the high-end real estate categories. The stars may have aligned in your favor to buy, but first consider your financial future.

Stable employment is a necessity. Unemployment is still high, around 10 percent, so the best advice is to assess your job status and be as confident as possible that you will still be working. That being a given, here is good information you need to know about real estate in 2010.

Prices to bottom out. On a national level, home prices went down nearly nine percent between the third quarter of 2008 and the same period in 2009, according to the S&P/Case-Shiller home price report. The second quarter decline was near 15 percent and the first quarter a 19 percent decline. Prices will continue to decrease a bit through third quarter 2010.

Mortgage delinquencies will continue to increase. At the end of third quarter 2009, about one in seven mortgages were past due or in foreclosure. Look for the delinquency rate to go up even further; about one in four homeowners owe more on their mortgage than the property is worth at today’s prices.

Upscale homes going into foreclosure. Foreclosure sales will hit about 1.9 million in 2010, with a growing number of those homes in the upper price brackets. While this does not mean the upscale foreclosed house will be a steal, this trend will add more variety to the market.

Mortgage rates will go up. Rates on a 30-year, fixed mortgages averaged 4.88 percent in November, down from 6.09 a year earlier. A contributing factor was the Federal Reserve program that purchased debt and mortgage-backed securities from Fannie Mae and Freddie Mac. That program will expire at the end of first quarter 2010 and interest rates may rise.

It’s a buyer’s market–for now. 2010 will still be a buyer’s market and should ease the pressure of a quick purchase. That balance will change as the year goes on, if the economy improves but will still give potential buyers some breathing space.

Tax credits available through June. Lower prices and lower mortgage rates are enhanced with tax credits for first-time buyers ($8,000) and repeat buyers ($6,500). As tempting as this is, you do need to consider the long haul when you buy a home and all the expenses involved.

With careful planning, a solid financial base and common sense, 2010 may indeed be the year to buy that home.

Written by Myra Vandersall

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