Homebuyers Need To Act Now....But How?
Local homebuyers should consider acting quickly this year unless they want to spend more money on their purchase. Locally, Lakewood has seen the Median Sales Price improve steadily over the past few years, improving from $108,000 in 2012, to $122,300 in 2013, and then jumping nearly another 8% last year to $131,000. The forecast is for another 4% gain this year. The reality-- homebuyers will pay more for their home purchase this year.
Economists also predict interest rates to rise this year. The Federal Reserve has continued to remind financial markets that they will raise the target federal funds rate at some point in 2015. This will directly cause lending institutions to raise mortgage rates. Most experts predict that we will see rates at 5% for a 30-year fixed mortgage by the end of the year.
Let's use last year's Median Sales Price to illustrate how this will impact buyers. If a buyer secures a mortgage with a 4% rate, and assuming a purchase at the median of $131,000, their monthly principal and interest payment is about $626 per month. If the rates climb to 5%, the same monthly payments on the same purchase jump to $704 per month, nearly a $1,000 per year increase.
Experts predict that housing affordability could decline as much as 10% this year between rising home values and rising interest rates. Simply put, buyers looking to spend $130,000 will now set their sights on homes in the 120s.
The good news is that rates remain, for now, near historic lows. The challenge, however, is that inventory is also at historic lows. As of February 10 there were only 86 single family homes for sale in Lakewood. That's correct. Only 86. Homes that are priced competitively, in good condition, are selling at a record pace. Many if not all are selling with multiple offers on the table.
There are several steps buyers can take to position themselves to make a purchase. First, get pre-approved with a reputable lender as soon as possible. Sellers will want to see an approval letter with a buyer's offer. Buyers should discuss financing options with their lender. Ask your lender if you need closing cost assistance from the seller. Often times it is the "clean" offer that gets accepted by the seller. If you are a move-up buyer, can you buy before you sell? It will be difficult to expect a seller to wait while you try and sell your current home.
Next, secure a realtor. Your agent will not only set up an auto search, but they will network with other agents. Often agents will hear about a property that is "coming soon." Be prepared to jump. When your agent calls and says you need to go see this new property now, listen. The perfect home listed today may not be on the market tomorrow.
Third, be ready to act. Do your homework now. Research neighborhoods. Set your budget on how much you will want to spend. Educate yourself on recent sales, trends, and home values. There are several sites and resources to use. Research community and neighborhood demographics at www.ClevelandsRealEstateSource.Info. Track real estate activity at www.RealEstateInsideAccess.Info. You'll need to provide an email address, but in return will be able to gain direct access to sold properties, price changes, etc. A good mobile app to add to your smart phone is either www.RealEstateUltimateApp.Info or Realtor.Com. Both are linked directly with the local MLS, providing the most up-to-date and accurate information available. Once you zero in on an address or two of interest go to www.HomeValuesInLakewood.Info and get a property value report.
If you follow some simple steps and develop an action plan you will not only position yourself to make a home purchase this year, but you will save yourself money as well!
Chris Bergin is a licensed real estate agent with Berkshire Hathaway Lucien Realty in Lakewood and can be reached at Chris@ChrisBergin.com.