If you have been out for a stroll around your neighborhood lately, you may be noticing the signs of spring, such as the return of little green buds on the trees and the fully occupied bird feeders. Other signs that signify spring is here include the much more literal “signs,” such as the ones that say “For Sale” and “Sold.” Over the past 5 years there have unfortunately been far more of the “For Sale” signs than the “Sold” ones, but is that true for this year too?
For the answer to that question, and a few others about our local real estate market, I asked the realtor and mortgage advisor that helped us purchase our home in 2011, “how is the real estate market doing this year in Eugene and Springfield, is it better than the past 5 years, worse or the same?” To this question they both replied, “2013 is definitely better!”
Something else they both agreed on right off the start of the interview, is that if you are thinking about buying a home this year, you should do it now. Why? There’s many reasons, some of them specific to the realty side and others specifically due to the lending side. These reasons include changes with FHA loans and laws, interest rates and home sales that may affect your decision to buy or sell a home now.
Let’s begin with the great news, which according to our realtor interviewee, is that the housing market is definitely making a great comeback this year. Prices are staying in a modest range, making it a great time for buyers. Just remember, that as the market gets better the prices will rise, although she doesn’t expect them to rise to the quite ridiculous level (my words not hers) that they did about 5 or 6 years ago. Still, they will go up, and are already, so this is one reason that now is a time to lock in at a great price if you’re buying.
To explain how well the market is doing, my source told me how many homes they normally (the new normal that is) have a backlog / inventory of, which was 21-22 months worth of homes to sell. What that means is that it would take 21-22 months for them to sell all the homes that were on the market, which of course meant there were a lot of homes on the market!
So what’s the backlog today? Well as of last month it stands at 5 months, or even a bit less! What a dramatic change for the good. There always seems to be a but or however when it comes to good news, and with this good news it’s no different. In this case our however is that this smaller inventory of homes for sale, will be, and are already, being sought after by quite a few buyers since there are now less homes for sale.
Nationally we are seeing a lot of bidding wars beginning to happen due to this. People know that times are returning back to the way they once were, as a 5-6 month backlog is the old normal, the good normal. It’s actually even at the high end of normal, so it’s maybe even better than normal once was. Certainly hope that makes as much sense to you as it did to me. Anyhow, due to this return to normal, there are once again more investors coming in to buy up the homes while they are still at great prices.
I saw a story on NBC News about a woman that has been trying to buy a home somewhere on the east coast, and that she has been outbid on over 30 houses, mostly by cash investors. Not only was she outbid, she was outbid by far as she was also offering to pay more than asking price by as much as 5%. Sadly, it was a tug of war that she still hadn’t won as of the airing of their interview with her.
After relating this story to the realtor I interviewed, I asked her if this is something we are seeing locally? To this she tells me that there is similar happening here, not to the scale of someone being out bid over 30 times on 30 different homes, but that it is happening. In fact, she was happy to say that many homes she sells are going for more than asking price and they are selling quite quickly.
The same goes for those that she assists in buying homes, in that they do have to sometimes bid a bit more than asking and there are more bidders than there were say a year or more ago, and she said that there are definitely more investors returning. This is all the more reason though to heed what both she and those in the mortgage industry are saying, which is buy now.
What about buying a new home though, one you have built for you? As for these types of homes, the answer from our realtor is that it’s going a bit slower in returning to normal. This is partly due to something many are familiar with and that is that there are a lack of construction workers or laborers. This is not only locally an issue, it’s also a national one. There are a few other reasons new construction will be slower to catch up, including there being not a lot of new lots to build on and the fact that it’s taking months to get some permits going even if they do find a lot and workers.
Aside from new homes though, the news is all good for being able to find and buy a home at a good price this spring of 2013. But let me have my trustee realtor source tell you what she has to say:
“We still have a low inventory and a lot of folks wanting to buy while the rates are still low as well as the prices are still down. This is creating a situation where we are seeing multiple offers on many of the homes. It is still one of the best times to buy that I have seen in the 20+- years I have been helping folks with real estate in the Eugene area…….and the market is definitely looking up for sellers!!” I would say that what she had to say about says it all, wouldn’t you say?
Part 2 of Home Buying and our Real Estate Market is Loans! So we talked about how the home sales are doing, but what about the rest of it, because finding a home that you want to buy is only half the battle. The loan or financing is the second half, yet it is actually something that should be considered first. That means that before you even look at one home, you should call your bank or mortgage broker to see if you can 1) even buy a home and 2) if you can, how much can you afford and spend?
This is the part of my interview that I turned to our mortgage advisor that helped us get out loan. So what does she have to say on this second, really most important part, of home buying? First, as I said earlier, she tells me that she agrees with our realtor, that the housing market is better, and that now is the time to buy a home, and when she says now, she means NOW.
“What’s the rush,” I asked? Well along with agreeing with our realtor that the homes are still selling at great prices, she also says that it’s a great time because of the interest rates. We thought we got a great deal at 4%, and it was and is still a great rate, however, now rates can drop as low as 2.5%! However, although you will see this low amount being advertised a lot, you should know that the average Oregon and national interest rate as of April 7th, 2013 is at 3.49%. Rates change quickly though, and that and the low prices are just 2 of the reasons for buying now.
This is also a good time to refinance, something I found out actually through this interview as they both told me that now is the time for us to also refinance and try for a lower rate. Not only trying for that lower rate, but also trying to get rid of something all FHA mortgage holders have; mortgage insurance.
This is where the real push for “now” comes in, which is due to some FHA changes coming. If you have an FHA loan or are going to be getting one, you will have to pay for mortgage insurance. Not only do you have to pay this extra money on top of your loan payment, beginning June 3rd, 2013 this payment will be required to be paid for the entire life of the loan.
It was at one time only added until your home had 20% equity in it, then, in fact at around the time when we bought our home (which was Sept of 2011), rules changed and it became that you have to pay this insurance (around $100 a month for us but depends on your total of your loan) for the first 5 years of your loan. Not only is it changing to be for the life of the loan, the rate or amount of the insurance is also going up, something it has done 6 or 7 times in the past 5 years. And as of April 1st, which was it’s latest increase, it’s currently at 1.55% of your loan.
What does this all mean for those wanting to buy a home in 2013? Again, take a mortgage advisors and realtors advice and buy it NOW. Get pre-approved and then start the hunt so you can get locked in before these changes, and a few more that are not so good, take place. This, however, does not affect you if you are getting a conforming or conventional loan.
Unsure about what loan you will need, FHA or conventional or if you have good enough credit to qualify for either? I asked those questions for you. Here’s what I found out from our source on mortgages that you need to know :
What you need to know about conventional or conforming loans verses FHA loans:
To get a conventional loan, which is loan not backed by the government (which is what the FHA loan is), you have to have pretty decent credit, meaning a credit score of at least 680 or higher. With a score less than 720, you will pay a bit more, but it’s not anything significant in most cases so it’s still worth trying for. You also put more money down on this type of loan, which is 5-20% and this amount must be totally from your own funds. The good news with this loan is that there is no mortgage insurance that you need to pay monthly and there are no upfront fees, both of which the FHA loan has.
The FHA loan is a loan that is given to 90% of homebuyers. This makes sense as it is easier to get an FHA loan than it is to get a conventional loan. For instance, with an FHA loan you need as little as 3.5% down, which unlike a conventional loan can come from someone as a gift. Your credit score can be much lower than that of a conventional loan, as low as 600 in fact. Of course there will be some penalties for a lower score like that, such as higher fees or interest, but for most people they don’t mind as they have now gotten for themselves the American dream; ‘homeownership.’
So, let’s sum it up, as much for me as it is for you so I know if I have covered everything!
Let’s start with the Good news:
- The real estate market for Eugene and Springfield is the best it’s been in about 5 years.
- The interest rates are at their lowest rates, not just for the past few years, but ever! In 2012 we hit a record when rates were at 3.31%, it had been 65 years since we saw that rate, so with some rates going as low as 2.5% (which isn’t going to be everyone getting that rate, more likely around 3-35%), we are now in record setting times.
- Housing prices have gone up, but not tremendously, so it is great for buyers but also not bad for sellers.
- Credit guidelines are still okay for those with lower or not so great credit, but it is tightening up in some areas of the loan, such as the FHA loans used to accept a utility bill or other payment that has been paid on time for a year or more, as extra proof or help towards a not so great great record. That is no longer to be.
Not so Good News:
- There are fewer houses on the market, the backlog went from 22 months to 5 months, which is such great news. But it also means that when buying a home you are going to have more competition than in years past and may pay more than asking price.
- FHA loans are changing. New laws are going to have FHA loan takers paying on their mortgage insurance for the entire 30 years of the loan, and this mortgage insurance rate has been, and will again June 1st, go up. With a June deadline, now is the time to get pre approved and start finding a home. Some other changes with FHA loans are also making this the time to buy before other rates, fees and rules change.
Few final tips and advice on home buying right now, some from me, some from the relator and mortgage advisor I interviewed, but all of it we agreed on. The first tip is that if you are worried that you have bad credit or your credit just isn’t good enough to buy a home, apply anyway.
It doesn’t hurt to find out if you can get a loan now, it does hurt if you don’t go ahead and ask because you will not likely find lower interest rates combined with these still great prices for a long time to come. Not to mention the change in the FHA laws that are going to be quite costly.
Next, starting now is a good idea because once you find a home, it takes around a month to complete your mortgage, maybe a bit longer or shorter in some cases and depending on who you go through. With some of the larger banks it is taking a lot longer. With a smaller and perhaps more local bank or credit union, it’s fortunately shorter since they often have their key people, like the underwriters, all in-house. This means your loan isn’t being passed around the country to all sorts of different people, people that don’t know you and that are also swamped with so many more loans.
This is already too long, but I do have more to tell you, including more tips, but there’s also a few other things that may be of help. What could I possibly have left to say? How about this: How can you buy your home online? What apps or sites are there to help you buy and even furnish or design your home?
Don’t think you can buy a house online? It’s quite possible these days, I know because I did it. The only time I left my home was to look at the homes we wanted to see and to do our final signing. Everything else was done from home, online. I was 100% disabled at the time so this was not me just being lazy, it was me needing to do it this way and I am so thankful to both our realtor and our loan officer, for working with me in that way. But they are totally used to it they say, and it’s a trend they both agree is becoming the new way of home buying.
So, I now really must conclude by saying that they are both simply awesome, as people and at their jobs, and thank them for helping me by doing this interview for this article. And remember, if you ever dreamed of buying a home in the future, the future is now, or at the very least, it’s before July 3rd.
If you are still ready for more, more of a bit of a tech point of view, then follow me to my blog site. The first article on How to Buy a House Online in Just 4 Steps is up now, and I also went ahead and researched and found some apps and sites that can help you buy your home.
A special thanks to realtor Pam Haggard of Eugene’s Alternative Realtors and Angela Kinari with Alpine Mortgage for helping me with this article.
* All images in this article are courtesy of FreeDigitalPhotos.net