These Times Won't Last Forever
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Thinking of buying a home? Don't take too long. There is no question this is still a buyers' market, but you'll find with a wave of investors in search of good deals, the bargain homes are selling at a much quicker pace. The low prices and low mortgage rates won't disappear overnight, but they won't last forever.
"This is one of those times that, 10 years from now, people are going to look back and say, 'If I only had made the decision,'" says Shaun White, a vice president for the RE/MAX real estate network.
And for those who have been waiting to refinance their mortgages but couldn't because their home values have tumbled, your chance to take advantage of historically low rates should be here soon -- if all goes as planned.
Here are some of the housing and mortgage trends you can expect to see in the first quarter of 2012.
Home Prices Begin to Stabilize
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If you have been waiting for the market to reach bottom to buy a house, the wait is over in many parts of the country.
"I think we've bottomed out," says Steve Anderson, a broker and owner at RE/MAX Benchmark Realty in Las Vegas. "If anyone wanted to buy a home today, now would be the time."
Anderson says even in foreclosure-plagued Las Vegas, homes priced according to the market have been selling quickly.
Home prices remain lower than about a year ago, but many housing experts say there's not much room for prices to fall further. Nationally, the median home price of existing homes was 3.5% lower in November 2011 compared to the previous year, according to the National Association of Realtors, or NAR.
While prices in some areas have taken bigger hits, and it's possible they'll decrease slightly in coming months, waiting to purchase may not pay off, some experts say. That's because if mortgage rates rise, the slightly better prices will not be enough to offset the higher mortgage costs, says White.
"We are either at the bottom or very close to it," White says.
HARP Could Lead to Refi Surge
Underwater borrowers, or those who owe more on their mortgages than their houses are worth, have anxiously awaited the day when they will be able to benefit from these historically low rates. That day is near.
The revamped Home Affordable Refinance Program, or HARP 2.0 that was announced in November 2011, allows borrowers to refinance and grab a lower mortgage rate regardless of how deeply underwater they are. The previous version of HARP did not allow refinances for borrowers who owed more than 125% of the value of their homes.
Despite the recent changes, most lenders have not been offering refinances under the new guidelines yet, as of early 2012. Industry experts say lenders are still making internal changes and are waiting for Fannie Mae and Freddie Mac to update their automated underwriting systems. The updates should take place by February or March, they say.
And if all goes as planned and lenders embrace the program, "there will be more refinance volume than lenders can handle," says Dan Green, a loan officer at Waterstone Mortgage in Cincinnati.
"Early interest in the HARP program foretells that HARP will be a bigger hit than anyone's imagined," he says. "There are three years of pent-up demand for a product like this."
But some are skeptical because the guidelines are optional and lenders can choose to implement their own "overlays," or restrictive rules.
"I'm cautiously optimistic," says Ed Conarchy of Cherry Creek Mortgage Co. in Gurnee, Ill. "But if lenders are reluctant to do it, I'm not sure it's going to help."
Mortgage Rates Likely to Remain Low
Thanks to the Fed and at the expense of the slow economy, mortgage rates are expected to stay near record lows for at least the first two or three months of the year.
"All indicate interest rates will remain stable for the foreseeable future given what the Fed has done and the nature of the U.S. economy," says Jason Auerbach, division manager of First Choice Loan Services in New York City.
The Mortgage Bankers Association estimates the average 30-year fixed rate will hover around 4.1% during the first half of the year, giving buyers and homeowners some extra time to take advantage of the historic rates.
"This is unbelievable," White says. "People who are in the profession have never seen rates this low."
But the caveat applies: Rates are unpredictable and can change at any moment without warning, Auerbach says. That means buyers and homeowners who want to refinance and are able to do so now shouldn't take a chance by waiting.
"There are a lot of buyers thinking rates are going to be the same for a long time, so they are in no hurry to buy," White says. "When rates move up, you'll see those folks get off the fence."
Investors, Foreign Buyers Flock to the Market
If you plan to buy a house, be ready to compete with local and foreign investors.
On average, 1 in 5 homes sold in 2011 was purchased by an investor, according to the National Association of Realtors. Many of these investors are foreign buyers who want to take advantage of the low prices and the weak dollar.
Buyers from Canada, Mexico, the United Kingdom, China, Brazil and other parts of the world have been actively purchasing vacation and investment properties in the United States, and this trend is expected to grow in 2012, White says.
"You will continue to see a lot of interest from foreign buyers," he says. "With the uncertainty that you see in economies around the world, they view (real estate in the United States) as a safe investment, and there is a large portion of the foreign buyers paying in cash."
Cash purchases account for about 30% of all homes sales in the United States, according to the NAR. In hard-hit areas, such as Miami and Las Vegas, cash purchases account for about half of sales.
Foreclosures and Short Sales Moving Quickly
Many buyers refuse to even consider purchasing a short sale because of the horror stories they have heard about lenders taking more than a year to approve a deal. Those buyers may want to reconsider this option in 2012. The short-sale process has improved and now happens more quickly, for the most part.
Frustrating, long waits still exist for some short sales, but many buyers are closing short-sale purchases in less than 90 days, agents say.
"Short sales are starting to move much quicker," Anderson says. "Everything is starting to get more streamlined. Those that work for the banks are better trained, and the banks more accepting."
Bank-owned properties also are selling faster. If you are eyeing a foreclosed house, don't expect it to stay on the market for long. Real estate agents who specialized in distressed properties say reasonably priced bank-owned houses often get multiple offers and go under contract for sale in days now instead of months.
Despite the high volume of foreclosures, Anderson says because these properties are selling quickly, "Supply is getting low and the demand is high." And, believe it or not, many of these properties are selling for more than the asking price.
"We are getting multiple offers on them," he says.