Blown Mortgage

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This question was posed over at the Bloodhound Realty Blog ; seeking opinions from different parts of the country on whether or not now is a good time to buy a home.  As a contributor there I chimed in with my opinion.  I recommend you visit the blog for other opinions as well.

In short, my opinion is "No. Now is not a good time to buy a home."

The main reason is that we are just at the top of a long slide for housing.  If you read any of the expert analysis out there no one is calling "the bottom" of the housing market any time soon.  We’re just starting to see home prices soften; and while its a change from previous years, its still a bit to early to jump in to the game.

Why is it too early?  Because we are going to see additional supply come on to the market which will further pressure home prices.  Where is this additional supply going to come from?  People who have adjustable rate mortgages recasting, that’s who.  2007 and 2008 look to be huge years for adjustable mortgages to come out of their fixed period - $1.5 trillion in 2007 alone. 

Many of these adjustments will make mortgage payments unaffordable to many homeowners.  They will either be foreclosed upon, or they will need to sell their homes at a discount to get out before they have their credit ruined by foreclosure.  This will give the market many motivated sellers (which means larger concessions to buyers) as well as many property auctions from banks trying to unload foreclosed real estate.  These two conditions will provide downward pressure on price in the short term, and also allow you as a buyer to negotiate a better deal on a new home purchase.

Because foreclosure proceedings typically take 90-120 days to begin, we’re really only seeing the end of 2006 recasting mortgages start to force foreclosures.  We should see a definite up-tick in foreclosure activity here in the next 90-120 days.  I would look to late this year to purchase if I was in the market.  There will be more supply, lower prices, and more property available through auction at reduced prices.

I hate the thought of profiting from someone’s hardships; however, if I am looking to buy it will not be until we’ve come down the slide a bit further.  What do you think, when is a good time to buy?

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