Now could be the moment to go ahead and buy a home

The Outlook

February 20, 2000|By Amanda J. Crawford

Existing home sales declined in January for the fourth consecutive month after 27months of increases.

January sales were down 9.01 percent in the metropolitan area from January 1999, according to statistics from the Metropolitan Regional Information System, the multiple listing database used by the housing industry. This was the largest decline since June 1997, just before the market began to take off.

While sales were down, however, prices across the region were up. The average price for a single-family detached home rose 10.51 percent to $220,865 and the average price for a townhouse rose 5.72 percent to $105,495 since January 1999.

Real estate agents blamed bad weather and low housing inventory for the sag in sales.

Just 12,002 homes were on the market at the end of January, compared with 15,318 in January 1999.

Is it a good time to purchase a home? Is the market likely to soften?

Anirban Basu

Director of applied economics at RESI, the consulting arm of Towson University

My impression is if you are considering the purchase or a home within the next two years, then this is probably as good a time as any to purchase a home. Though mortgage rates are higher today than they were a year or a year and a half ago, they are unlikely to fall substantially over the next several months and they may even rise further.

If one is an extremely patient buyer, [one] may want to wait for a softening of the economy, which would presumably create an environment which mortgage rates may dip, but that is something that does not appear to be imminent. As a result, most buyers will not be happy to endure that wait.

Unfortunately, the best period to buy a home has probably passed us by.

Mortgage rates are back at normal levels after dipping due to the Asian financial crisis, and the inventory of homes is quite low at this time, limiting selection. If mortgage rates are not going to fall any time soon, then it doesn't appear that there is any reason to wait much longer, unless you are unable to find a home suitable to you in the existing inventory. If you do find a home in that inventory, : this is as good a time to purchase as any because mortgage rates don't appear as if t hey will dip any time soon.

Deborah Ford

Professor of finance, University of Baltimore

I would say that whether or not it's a good or a bad time to buy a house is dependent on a lot of factors, personal as well as economic. Right now, interest rates have gone up,and there doesn't seem to be any sign they will be falling again. So I would say interest rates are a factor, now would probably be a good time to buy before they rise again.

I think that the Realtors are correct that there is a very low supply of houses and that's holding prices up.

But there is no reason to believe prices will fall. I don't see any reason why there should be a softening in the market. Inventory is low now, and I don't see any reason for a glut of houses to come on the market.

So my conclusion is if somebody has the down payment, wants a house and has their lifestyle ready for a house, today is as good a time to find it as any. There is nothing to wait for.

Robert Van Order

Chief economist, Freddie Mac

I think if anything, it's a good time to buy. I think prices may not grow as rapidly as 10 percent, but they are still going to grow. Even though interest rates are up, if you look at them after taxes they are still in the range of about 5 percent, depending on the tax bracket you are in.

In my best guess, I think prices are going to grow by at least 5 percent nationally. So between price appreciation and the mortgage interest deduction, you have the interest paid for.

The flip side of this is if you wait a year, you are going to have to pay something like 5 percent more because of the increase in prices, and I think that's a conservative estimate.

I see a littie bit of softening. Nationally, our data suggests that prices have been growing at about 6. 5 percent over the last year, and that's about 4 percentage points higher than inflation. That's quite strong.

My guess is nationally, we'll see a slight decline in sales and sale prices will grow by about 5 or 6 percent. It's not like the '70s when there were panics to buy houses, but it's a good time.

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