7 1/2 Reasons Why the Real Estate Market is Stagnant

Are you one of the many renters in Minnesota who wants to become a homeowner but you’re just not ready? Or maybe you lost your home in the past and you’re not sure you can ever qualify to own a home again?

Don’t sell yourself short! Like many future homebuyers, you may have reasons as to why you’re not quite ready to buy. Below is a great list as to why people are waiting for their ideal time to make the big home purchase. Some of these can be overcome by meeting with a mortgage professional and educating yourself on the current mortgage requirements in Minnesota.

7 1/2 Reasons Why the Real Estate Market is Stagnant

1) Job Security – The unknown is scary for everyone. With the economy in flux, the fear of being laid-off is of great concern for many and the number one reason people are not jumping into this red hot homebuyers real estate market.

2) Down Payment – The days of “no money down” are gone and saving for a down payment is a hard thing to accomplish. This is especially hard for those in their 20’s that are a couple years removed from college. In the past, these first time buyers have helped those that have outgrown their home (move-up buyers) and have fueled the real estate market. With student loan debt out of control, these first-time buyers are unable to purchase unless they can receive a gift from a relative. Until we have the first-time buyers enter the market again, we will continue to stay in this stagnant state.

3) Credit Scores – Credit scores are still a mystery for many, but not knowing where you stand can hurt you. It’s smart to check your report for errors once a year and it’s also free to do.  Visit www.annualcreditreport.com each year for a free checkup. Credit scores minimums have made buying a home harder as well.  During the “sub-prime” mortgage days, if you had a low credit score you could still get a loan, but you’d just have a higher interest rate. With virtually all of these companies out of the business, there is no outlet for those with less then perfect credit.

4) Debt-to-Income Ratios: Guidelines – In recent years, debt-to-income ratios have come down to more realistic levels.  In the mid 2000’s, banks approved loans with extremely high debt-to-income ratios to often and set the homebuyer up for failure in the future. This is still another hurdle though for many potential home buyers.  If you’re self-employed and take advantage of many tax breaks, your income may be reported lower than what you really show for cash-flow. This makes it difficult to get approved.

5) Debt-to-Income Ratios: Comfort Zone – Like #4 above, these ratios were way out of whack. The recession has made many people rethink their budgets and future spending habits. This is a good thing for America and Minnesota. In the short-term though, we’re seeing home buyers, spend less or just plain wait for a raise so they can buy what they actually want in a home. As interest rates rise in the future and as the market comes back, the purchasing power will get less and less for homebuyers than now.   

6) Mis-Information – Media shapes the perceptions of everything. What we hear on the news, read in the newspapers must be true right? Not the case! When hearing things in the media or even from a friend or neighbor may not be the whole truth, so it’s a good idea ask a professional before you dismiss the potential of buying versus renting. 

7) Mobility/Liquidity – This is of concern to many that have are relocating or have funds tied up in retirement accounts these days. Yet, another reason people are sticking with what they know rather than taking the leap.

7 1/2) Waiting for the Bottom – Oh, how we all like to time any market perfect and have bragging rights to our friends. Truth is, it’s near impossible to know. What you do know is where the values are now in a specific community like Maple Grove and where interest rates are at the time of purchase. Put these together right now and you have high purchasing power. This may not get any better for buyers. Even if the home value drops slightly or stays the same, the interest rates may not be this low ever again. You’re going to come out ahead with a lower interest rate, rather then wait for the homes to drop another $5,000 in value. Remember, interest over 30 years adds up!

If you want to be a homeowner at some time in the future - you owe it to yourself and your family to get started now.  Whether you're looking to buy in five months or five years, it's okay to wait for your "right time."  It's not okay to not have a plan! 

Contact a mortgage professional to review your credit, income, and down payment availability now. It’s a good idea to have any issues ironed out prior to shopping for a home. The last thing you want is to fall in love with your dream home and have that dream stripped away or have it cost more to obtain because of something minor that could have been fixed on your credit report or even waited to save just a little bit more money for down payment to get better terms on your mortgage. 

Also, bring a list of questions while sitting down with a mortgage professional. It’s a great time to educate yourself on this ever changing mortgage environment we’re in. There may even be things you’re heard on TV, radio or from friends that may not be completely true, so getting a straight answer from your mortgage professional is a safer bet.

7 ½ Reasons Video – click to view

Dan Eveland

763-202-7600

www.WhatIsYourAddress.com

Waterstone Mortgage - Branch Manager/Mortgage Consultant

NMLS # 279274