Right Now Is the Time to Buy a House!

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Now is the time to buy a house in the U.S.

It's not because of what's specifically going on in the housing market. It's not because of supply and demand or some good data point that could drive prices higher.

Believe me, there are still plenty of reasons to be bullish on housing, as I've recently explained. But that's not why you should consider buying TODAY.

It's time to buy a house right now because home prices suffer from extreme seasonality. And January is the absolute best time to put your money to work.

Let me explain…

"Seasonality" simply means that an asset's price tends to peak and bottom at certain times of the year. Many assets are seasonal… But few assets move in seasonal trends as consistently as U.S. housing.

Home prices tend to bottom (for the year) in January. And they tend to peak (for the year, again) in June. This happens year after year, like clockwork.

The chart below shows average single-family-home prices since the housing bust. The pattern is consistent and obvious. Take a look…

The lows always occur in the winter months (January), and the highs always occur in the summer months (June).

And this isn't a post-crash phenomenon. Housing prices have followed this pattern for decades, as the chart below shows. Look at the consistent "up-and-down" price movement from year to year. It's incredible…

What's crazy is how extreme the swings in housing prices are from their yearly bottom to their yearly peak… In short, home prices typically make all of their gains from their January bottoms through their June peaks.

The table below shows what I mean…

Home prices have only increased 3% a year since 1989. And all of the gains happened from January to June… In that period, home prices tend to rise 9%, on average. Wow!

Over the rest of the year – from June to January – home prices tend to lose value.

If you've been wondering when to finally take that step and buy a new house, you've got your answer… Right now!

January is the best time of the year to buy a home. It's the seasonal bottom for home prices in the U.S. And the biggest gains for 2016 will likely occur over the next five months.

If you're thinking about buying, do it now!

On Your Team,

Ken
951-760-3833
KenAHall@gmail.com

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HOW TO GET YOUR LENDER TO PAY YOUR CLOSING COSTS

Many prospective buyers have a downpayment but are 'short' dollars for closing costs, (typically 2-2.5% of the loan amount), which include 'hard costs,' prorations, impounds for taxes /insurance, and 1 month’s house payment.

But there are options that can HELP squeeze buyers into that first home.

'Lender Paid' Closing Costs

FHA –VA- and Fannie /Freddie all allow the lender OR sellers to pay the buyer's closing costs.

Let’s focus on the lender options

If the buyer has a low 'debt to income ratio' (DTI) they can then inflate their interest rate and use the lender 'rebate' to cover the closing costs up to 3% (points) of their loan amount.

Banks and mortgage bankers typically limit buyers to 1% of the loan amount in lender paid closing costs; mortgage brokers are limited to 3%.

Most buyers initially react poorly to the proposal of a higher initial payment; so let’s do the math (all numbers rounded off) for just the 'P and I' (principal and interest) portion of the monthly payment.  

Get ready to be surprised.

Interest Rate vs. Lender Credit, Scenario 1

$300k Loan

30 year Fixed

Interest Rate: 4% (Zero Points)

Payment: $1432

Lender Credit to Buyer: “Zero Dollars”

Scenario 2

$300k Loan

30 year Fixed

Interest Rate: 4.5% (Zero Points)

Payment: $1520

Lender Credit to Buyer: $6,000

Dividing the $6000 credit by the higher payment of $88, puts the buyer in the positive cash flow position for 5 years 8 months (68).

The issue to keep in mind, during those '68' months it’s (statistically) a virtual certainty the homeowner will:

1) Purchase a 'move-up' home

2) Refinance their current loan to a lower rate, get rid of their monthly mortgage insurance or get a 'cash out' refi.

Government Loans

If a buyer is getting an FHA or VA loan, we can 'streamline refinance' their loan 7 months later to a significantly lower interest rate with little or no closing costs.

In Closing

The amount of lender paid closing costs a buyers can receive varies by each type of lender.

Mortgage brokers can pay up to 3% of the loan amount while banks and direct lenders are limited to 1%.

So shop around, it can be the difference of thousands of dollars.  Call me anytime if you have questions.  

Ken

951-760-3833

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