Yahoo Finance 10 Things To Do If Home Prices and Mortgage Rates Don’t Drop This Year
If you’ve been waiting for the real estate market to shift into your favor, with lower home prices and lower interest rates, you might be frustrated, as industry professionals continue to report insignificant changes.
It’s better to think of the real estate market as a roller coaster — thrilling and unpredictable, said Matt LaMarsh, a real estate advisor and market expert with Engel & Völkers.
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“Instead of hoping for a drop in prices or rates, focus on what you can control. Start building a strong financial foundation. Save aggressively, reduce debt and improve your credit score,” he said.
He and other real estate experts suggest some things to do if you’re feeling frustrated by the sluggish state of the housing market.
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Reassess Your Budget
While it can be disappointing not to find a house at the perfect price or rate, it’s still a worthy investment that may be worth paying a bit more for, according to Jared Blumberg, licensed real estate salesperson and co-founder of the Werner Blumberg Group at Compass New York City.
“I am advising my clients to reassess their budgets for a home as opposed to waiting for rates to come down. Nothing is guaranteed, but it is very likely that rates will come down. The big question is when and how much? No one knows the answers to those questions,” he said.
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Don’t Wait Too Long
Blumberg’s concern is that if you decide to sit and wait, you could be waiting for a very long time.
“It is also likely that when rates do come down, home prices will conversely go up. My advice to homebuyers is to keep looking and when you see something that you like and you can afford, don’t hesitate to jump on it,” he said.
Tristain O’Donnell, a Realtor with Engel & Völkers, added that homebuyers should not put all their eggs in one basket as it pertains to hoping interest rates and/or home prices will drop.
“In my opinion, home prices won’t drop in the next 12 months and should interest rates drop, home prices will rise, creating a catch-22. Do not bank on home prices and interest rates to both drop,” she said.
Don’t Focus on Rates
Blumberg said that the current housing market is one of “very tight inventory” and he expects that to continue, but there are some good prices, if you know where to look.
“Prices are great in many markets right now, especially where I do business in Manhattan and Brooklyn. I think buyers are currently focusing too much on interest rates, because they are temporary. You can always refinance later on. You date the rate, but you marry the price. Lock in that good price on a great home while you can, because that purchase price is forever,” he explained.
Find a Price You Can Live With
If a homebuyer absolutely needs prices to drop and interest rates to drop in order to purchase a home, they should prepare for the latter, O’Donnell said, as interest rates dropping is likely to occur way before prices drop.
“But be prepared, because when interest rates drop, which may be more favorable for that buyer, demand will also increase, which means you will likely be in a situation where homes receive multiple offers,” O’Donnell said.
Consider Your Options
Homebuyers have several options available to consider to solve affordability issues, O’Donnell said.
“They could consider rate buy-down options, consider loan programs with no monthly mortgage insurance and/or programs with a much lower monthly mortgage insurance payment,” she said.
Get Creative
Greg Clement, CEO of Realeflow, a real estate investing software, suggested that if your perfect price and rate are not presenting themselves, you should get creative.
“Look into multi-family properties — live in one unit, rent out the others. House hacking can drastically reduce your living expenses.”
Another option is to team up with friends or family for joint investments, Clement said. “Pooling resources can help you afford a better property.”
Lastly, he recommended considering adjustable-rate mortgages (ARMs) if you’re certain you won’t be in the home for long.
“Lower initial rates can make your payments more manageable, but be sure you understand the risks. It’s all about thinking outside the box and taking bold steps.”
Branch Out
Homeowners should also be flexible in looking at different areas or neighborhoods that fit the criteria of the home they want that may be lower priced, O’Donnell explained.
If the area or neighborhood is of key importance, consider a change in the type of house you’re seeking. Or consider buying a fixer-upper at a lower price and planning on making some home improvements over the years in order to get into the area or neighborhood, she suggested.
Do Your Research
LaMarsh recommended that people do their research before deciding their chances aren’t great to find a home at the rate or price they want.
“No one has a crystal ball and can predict what will happen with interest rates or home prices. But we can look at the data. 33% of prices on homes in the market currently are being reduced due to overzealous sellers and miseducation or miscommunication about the market conditions,” he said.
Don’t Go It Alone
O’Donnell said that it is important to have a team on your side when you are in a tight spot waiting for prices and interest rates to drop to help you think “outside the box.”
Additionally, she said, “Having a lender and a real estate professional working together to strategize together will be key for getting the most out of your budget if waiting for rates and prices to drop is not an option.”
Buy Only What You Can Afford
Even if you do jump on a house despite it not quite fitting the price or rate you had in mind, it’s important to buy only what you can afford. “Never ever buy a home based on an interest rate and only purchase what you can afford at current rates. If rates go up, you’ll be happy that you purchased and got a lower rate and if they go down, you can always refinance this having on your monthly mortgage payment,” LaMarsh said.
Mostly, don’t lose hope, even if the desired price or interest rate drops don’t happen when expected.
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This article originally appeared on GOBankingRates.com: 10 Things To Do If Home Prices and Mortgage Rates Don’t Drop This Year
