A day doesn’t seem to go by without the media reporting how bad the economy is. It reports about companies that are laying employees off; retail sales slumps; companies closing; and of course the roller coaster ride of the stock market. Tucked somewhere in all that chatter the media reports that mortgage rates are down.
I have stated many times on this blog that interest rates for mortgages are at an extremely low rate – 4.1% as of September 12, 2011 for a 30 year fixed. Adjustable rate mortgages are at 2.8%. These rates are the lowest they have been for “at least 40 years” according to the National Association of REALTORS®. Yet, there are few buyers jumping into the market!
There are a lot of reasons for buyers not wanting to get into the market, and there are as many reasons as there are buyers. But some of the more common reasons revolve around the job market and the ability to get a mortgage.
With the unemployment rate around 9.2% there are literally millions of men and women who have lost their job or may be underemployed. And, there are millions more who undoubtedly are concerned waiting to see if their job will be the next to go. Bank of America just announced laying off 30,000 employees in the next couple of years. Several other companies have announced lay offs and that has to wear on those who are employed. Retired individuals who rely on their savings have seen dramatic drops in the stock market and many of those folks have seen large drops in the money they expected to receive.
Yet, there are millions of people – in fact the majority of people – who are working and have the money to get into the home market, yet, in large part, they do not. Why?
Again, there are as many reasons as potential buyers why someone does or does not do something, but there is one reason that seems to be a recurring theme. Banks are not loaning mortgages.
Even though home prices have fallen dramatically in the last few years and interest rates are at historical lows, potential buyers are not able to obtain the mortgages needed to purchase homes. People with pristine credit ratings are complaining that the banks are requiring them to “jump through hoops” to obtain a mortgage. The normal credit score for a 30 year fixed mortgage historically was 650, now the banks are requiring a credit score of 700. Even with the higher score, buyers are bewildered with the requirements banks are insisting on to approve a loan.
To make matters worse; when a potential buyer hears of interest rates in the vicinity of 4.1% and then talks to the mortgage lender and are told that they will only qualify for an interest rate of say 6.5%, they feel ripped off. Even though 6.5% is still a respectable interest rate, buyers are put off and walk away with bad feelings.
I encourage anyone who is thinking of buying real estate to talk with a REALTOR to get the facts of todays market. If you do not know a mortgage broker who can help you get through the maze of information, your REALTOR will be able to help you with that. Real estate is still a viable option in attaining wealth and this is a good market to buy a home.
As always, if I can help you with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182, or email me at RolandLow1@gmail.com.