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2012-11-13 12:15:07
Real Estate Matters: Affordability in today's mark

Rodger Hardy

Affordability these days is near an all-time high.

Today's real estate market offers the wonderful combination of low interest rates and low prices, which almost never happens. The 'normal' scenario is that when interest rates fall, prices rise and vise versa. 

Still, I'm hearing from a few folks who want to buy, just not right now. They may have good reason or it may be their fears talking. For example, do they think prices will continue to fall? That's true in some areas, but not in Utah.

Trulia.com is a national real estate website. In its October price reduction report, it showed that 27 percent of American homes listed for sale had their price cut at least one time! That, Trulia said, was an all-time high.

But let's not confuse the national real estate market with the Utah real estate market. It's different here. Prices are going up — 6 percent over than last 12 months in Utah County — and inventory is going down . So how do you know when you it bottom? When prices start going back up and that's happening here.

Low inventory is another reason some folks are waiting. I have buyers looking for homes that just aren't being offered for sale. So they must either take what's available or stand in line for the perfect house to come along.

Another reason is the perceived difficulty in qualifying for a mortgage. True, loose mortgage guidelines stemming from the Clinton years have tightened up. Now, you have to have good credit (imagine that) and a proven ability to pay back the money you borrow. Also, a stable job history and some cash for the earnest money, down payment, appraisal and inspection.

Many buyers disqualify themselves without even talking to a loan officer to get the real scoop on their ability to buy a home. Others don't want to talk to a loan officer until they find the home they want. Both are bad moves.

Your first step should be in the direction of your favorite loan officer, whether it be at a bank, credit union, mortgage bank or mortgage broker. That way you can find out what you need to do to get qualified or for how much home you can buy and how soon.

Not everyone has to pay 20 percent down. Some programs require only 10 percent down or even 5 percent. Then there are FHA loans that are just 3.5 percent down or Utah Housing with nothing down. Veteran Administration loans also require zero down as do rural housing loans, good for only certain areas. 

Realtors often have a favorite loan officer or two who can prepare a variety of scenarios to fit your particular situation. So ask your agent to recommend someone to you. Although you can go with whomever you want for a mortgage loan, your Realtor may have already established relationships.

Also, when you make your offer, consider asking the seller to pay your closing costs. Sometimes they may want to raise the price to cover those costs and that may work if the appraisal is high enough and both parties are willing. 

Darker fears may also be at play. Some buyers are fearful of buying a short sale but it really shouldn't affect the buyer. Sellers, on the other hand, have plenty to worry about if Congress doesn't extend the Mortgage Forgiveness Debt Relief Act of 2007 that expires Dec. 31. That Act protects short sale sellers and those who went through a foreclosure from paying income taxes on the deficiency between the selling price and the amount owed. The feds see that as income, even though homeowners never saw the cash.

Another concern is that the so-called 'shadow inventory' — homes the banks are holding onto — will be released and drive prices down even more. So far the banks aren't doing that because driving prices down would hurt them as well. On the other hand, some buyers are waiting for those homes because they can't find the home they want in existing inventory.

The solution to a seller is to price your home well, fix those basic and inexpensive items that could stop a sale and put your home in 'showing shape.' To price your home well have your agent show you comparable listings that are both active on the market and expired, not just sold. Expired listings are usually the homes that were priced too high, so price yours below them and closer to the sold prices, but below the competition.


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