Is the Housing Market on the Way Back Up?
ByTypically a balanced market is considered 6 months of housing inventory. Under six months is considered a sellers market, and over six months is considered a buyers market. Home supply is arrived at by taking the current number of houses for sale in a market and dividing by the number of sales in that month.
Graph from Metropolitan Indianapolis Board of Realtors data as of Oct. 2009
As you can see from the above graph overall the Supply has dropped when looking at 2007 and 2008. Actually in about half of the 13 county area. This is good news if you are a home seller, because it shows you have less competition. One key point is that while this doesn’t appear to the bottom with the supply decreasing it shows that pace of decline is slowing and that we could be poised for an increase shortly. Let me point out that trying to time the bottom is like trying to catch a knife, we’ll never know the exact bottom until prices begin increasing consistently.
The Federal Reserve is set to stop buying Mortgage Backed Securities on February 2010. The purchase of mortgage backed securities has kept mortgage rates low. After the Fed stops buying mortgage rates could rise as much as 1% very quickly.
An increase of 1% in interest rates will decrease your purchasing power by 10%
Example of Your Purchasing Power with a 1% Increase in Rates:
Rates are presently at 4.75%, so if you presently qualify for a $200,000 house. If rates jump 1% to 5.75% you would now only be able to qualify to purchase a house of $178,777.
When you’re ready to start the pre-approval process head over to LakewoodLenders.com
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