I’m often asked whether now is a good time to buy a home. I usually tell people that it’s always a good time to buy — as long as you’re buying the right home at the right price and on the right terms. 

The fall home-selling season is a good time to take that answer a step further and look at what’s happening in the world of residential real estate and how to make a smart move on your own schedule.

For buyers and sellers almost everywhere in the country, the housing market has slowed. The National Association of Realtors announced recently that existing home sales dropped more than expected.

More new and existing homes are on the market than at any time since 1993. Homes are taking longer to sell, and according to the latest Freddie Mac survey, house-price appreciation has slowed to 4.9 percent annually from 13 percent. The National Association of Realtors says that existing-home appreciation will slow to just 2.8 percent in 2006.

These statistics would seem to suggest a housing market on its last legs. But as is often the case with economics, the numbers are confusing.

As Frank Nothaft, Freddie Mac vice president and chief economist, notes, single-family housing sales are strong enough to make 2006 the third-strongest year for housing sales in history, but sales are expected to be off more than 16 percent from last year’s pace. Sales of existing homes are expected to fall 7.6 percent to 6.54 million units this year.

The long-term interest-rate picture continues to be eye-opening. Interest rates on a 30-year fixed-rate loan are averaging about 6.5 percent. The interest rate on a 15-year loan is averaging about 6.16 percent. During the past two years, interest rates on short-term loans have skyrocketed, with homeequity loans and lines of credit now ranging from 8 to 9 percent.

While long-term interest rates are up dramatically from a year ago, they’re still cheap by historical standards and should remain constant through the end of the year.

“We expect that mortgage rates will continue to fluctuate as new economic data are released, but still remain in the 6.5 to 7 percent range for the rest of the year,” Nothaft said.

Will housing prices continue to fall?

That depends on supply and demand, economists say. For now, sellers are holding on to their prices, preferring to keep their homes listed for months rather than drop the price.

“Housing numbers for existing home sales will fall through the end of this year before stabilizing. Then, they’ll move sideways,” explained Dave Seiders, chief economist of the National Association of Home Builders.

Seiders said that builders are pouring a lot of effort into developing incentives for buyers, including paying the buyer’s closing costs, absorbing financial points and buying down the mortgage’s interest rate.

“Listings have remained aggressive while sales have been falling. Inventory (of new and existing homes) is rising aggressively. People who want to sell their existing homes aren’t getting what they thought they would get and end up pulling their houses back off the market,” Seiders said.

When you combine higher housing inventories with longer list times and historically low interest rates, it’s a strong hand for buyers with at least some down-payment cash in the bank and good credit.

And it might mean that now is a great time to start choosing a neighborhood and looking at the housing stock. If you find a house you like and it has been listed for the past three to six months, the seller might be ready to cut you a great deal.

But take your time. In a buyer’s market (where more sellers have listed homes than there are buyers to purchase them), buyers typically have plenty of time to compare prices, amenities, neighborhoods, commutes and other features.

“It allows potential home buyers more time to look around and decide what they really want and what they can afford,” Nothaft observed.

One thing to watch for is an increase in foreclosures because of sellers defaulting on their pay-option adjustablerate mortgage loans. If more sellers find they can’t make the payments on these exotic mortgages, you might find that the best time to buy a house isn’t today, but during the next six to nine months — when those homes start to go into foreclosure.

Source:

http://www.dispatch.com/homegarden/homegarden.php?story=dispatch/2006/09/17/20060917-I3-00.html