Straight Answers

IF YOU’RE READING THIS ARTICLE, YOU’RE LIKELY CONSIDERING A HOME PURCHASE. SMART MOVE, ESPECIALLY NOW.

Of course, you’ve heard “buy now” messages before and you’re dubious. After all, many media reports give the impression that the sky is falling economically and that you should be hoarding your money in a mattress instead of buying a new home.

There’s no doubt that the economy is a mess. But many factors contributing to this unusually painful recession have also created unprecedented opportunities for homebuyers.

Nobody can predict the future with absolute certainty. But most experts now say that it’s difficult to imagine a more favorable situation if you’re in the market for a new home, assuming you have good credit and verifiable income.

Let’s talk about it, shall we? Following are some questions and concerns we commonly hear:

Q. I keep reading that home prices are falling and that some people are “upside down” on their mortgages. Shouldn’t I wait until prices hit rock bottom?
A. Nobody can time the absolute bottom of the market. But it’s a fairly safe assumption that if we’re not at the bottom now, we’re very close.

And all that chatter about home prices falling, while true, is also misleading. Home prices have indeed fallen from absurdly in-flated levels reached during the “bubble” years.

But you need to take a longer view. From 2004 to 2006, home values locally soared 51 percent. However, in the 25 years prior to that, home values increased by an average of 5 percent per year.
So, if you discount the crazy period as a speculation-fueled aberration, new home prices are right about where they should be.

“We’re not experiencing an unprecedented decline in home values,” says Jim Lewis, president of Charles Wayne Consulting. “We’re experiencing an unprecedented return to normal.”

Q. Yes, but what about all that unsold inventory? Doesn’t that mean prices will drop further?
A. The unsold inventory is dropping, at least in most Florida markets. For the Orlando">Orlando area— Lake, Orange, Osceola and Seminole counties — 2,763 homes were sold in July, a 56.3 percent jump when compared with the 1,768 sold in July 2008, according to the Orlando">Orlando Regional Realtor Association (ORRA).

At the same time, new-home construction has slowed to a crawl. That means the market is finally coming back into balance. So, of course there could be room for further price declines—but the pace will clearly begin to slow. And some experts are predicting that prices may begin to rise again by late this year or early next year.

So there would seem to be more of a risk in waiting to buy than in buying now. And remember—the new $8,000 tax credit for first-time buyers is set to expire on November 30. Homes must be closed—not just contracted—by that date.

Of course, Congress might extend the tax credit for another year. Supporters have offered various alternatives, such as expanding the credit to $15,000 and extending it to all buyers, not just first-timers.

But in the current political climate, none of this is certain. All you can really count on is that there is an $8,000 credit on the table now and it’s about to expire. Beyond that, there are no guarantees.

Q. What’s the deal with that tax credit?
A. There’s a separate Q&A about it in $8,000 Break for First-time Buyers. If you meet the criteria, it’s a terrific incentive.

Q. That’s all well and good, but I understand banks aren’t loaning. What are my chances of getting a mortgage?
A. Banks are lending, but they’ve gone back to basics. That is, you need to have good credit, stable employment and a down payment saved to qualify for a loan.

“We’re seeing people who’ve been priced out of the market for four or five years now who are finally able to buy,” says Peggy A. Thomas, president of Thomas Mortgage and Financial Services in Altamonte Springs. “But the sub-prime loans and the loans without income verification are gone.”

Mark Zandi, chief economist for Economy.com, predicts that mortgages are about to dive again, with government mone-tary programs pushing rates as low as 4.5.

For more on mortgages, see Bank On It.

BUYER RESOURCES
HOME INFORMATION
www.orlrealtor.com. On the Orlando">Orlando Regional Realtor Association (ORRA) Web site, you can find licensed Realtors, search for homes and see area market reports. There’s also a home search function.
www.myfloridahomesmls.com. The Multiple Listing Service (MLS) contains virtually all existing homes for sale and is the definitive resource for Realtors. But there’s lots of consumer information as well.
www.florida-homebuyer.com. Florida Homebuyer Orlando">Orlando’s Web site contains the most comprehensive database of new-home communities to be found anywhere, searchable using an array of criteria.
www.zillow.com. This site is fun and informative. Enter your address—or the address of a home you’re coveting—and you’ll get a picture from Google Earth as well as estimated value and other information. See what your neighbors’ homes are worth, too, just for kicks.

MORTGAGE INFORMATION
www.hud.gov/fha/choosefha.cfm. The Web site for the Federal Housing Administration’s (FHA) loan program has everything you need to know about FHA loans and FHA-approved lenders. There’s even an “Ask the Expert” component.
www.freddiemac.com. ?Consumers don’t deal directly with Freddie Mac, which buys mortgages from lenders, packages mortgages into securities and sells the securities to investors. But its Web site is an excellent resource for first-time buyers.
www.fanniemae.com. Like Freddie Mac, consumers don’t deal directly with this federally chartered mortgage underwriter. But its Web site helps you find a lender or a housing counselor who can offer advice on buying a new home or on holding on to the home you have.
www.homeloans.va.gov. The Veterans Affairs (VA) Web site outlines home-ownership programs designed specifically for vets—and there are a number of them.