Home Buying Across Time

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Over the last few years, home buyers have been struggling with low inventory and high demand, often having to compete with other home buyers for the same properties. Today, it’s more common for these home buyers to place bids three to four times until they finally win a property.

Home Prices vs Inventory 2008 through 2018

That’s a big difference from just ten years ago when the real estate market was still feeling the effects of economic collapse.  Home prices were still high while the number of home buyers across the nation dropped like a rock.  A sudden mass exodus of jobs left millions holding overinflated mortgages that forced many into foreclosure.

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Looking at the Housing Affordability Index above, homes are now more affordable than in 2008 when prices crashed after the bubble popped in 2008. Many factors contributed to the market collapse and it’s worth noting those hard lessons. 

We study mistakes in history today in the hopes that we will not make them again tomorrow.

Mortgages Throughout History

Back in the 1930’s the average home size was under 1,000 SF and lenders required high down payments up to 50% of the value of the home. Terms were five to ten years and borrowers could only borrow 50% of the property value.

After WWII, mortgage terms grew to a maximum of 30 years and fixed-rate mortgages came on the scene. Home buyers could finance up to 95% of the property value.

Over time, mortgage requirements relaxed to the point that federal government was continually pressuring lenders to relax their requirements. 

Leading up to the burst in 2007, home buyers could easily borrow more than the value of the property. It was ridiculously easy to obtain an adjustable rate mortgage for those who couldn’t otherwise qualify for a fixed rate loan.

As such, borrowers getting in over the heads was an inevitable outcome. 

real estate across time, home buying, home buyers, mortgage rates, mortgage lending rates

Buying on A Budget

As a Realtor in Michigan, I’ve seen many new buyers come on the market. What’s comforting is that most of them seem to have learned from their parent’s mistakes. Today’s millennial buyers are more conservative in their willingness to mortgage property. Often qualifying for more but setting lower limits for themselves. That’s very encouraging.

Home buying today is much more complicated, working with a buyer agent is the best way to protect yourself in what is easily the biggest purchase in a person’s lifetime. You can’t beat the price since buyer’s agents are paid by the seller, not the buyer in most cases.

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Here’s a quick look at today’s current mortgage rates for both Fixed and Adjustable rates.

September 2018 Mortgage Rates
  • A 30-Year Fixed loan of $300,000 at 4.49% APR with a $75,000 down payment will have a monthly payment of $1,517.
  • A 20-Year Fixed loan of $300,000 at 4.38% APR with a $75,000 down payment will have a monthly payment of $1,878. 
  • A 15-Year Fixed loan of $300,000 at 3.85% APR with a $75,000 down payment will have a monthly payment of $2,195.
  • A 10-Year Fixed loan of $300,000 at 3.85% APR with a $75,000 down payment will have a monthly payment of $3,016. 
  • A 7/1 ARM loan of $300,000 at 3.98% APR with a $75,000 down payment will have a monthly payment of $1,428. 
  • Rates are projected to climb to 5.1% by this time next year according to Freddie Mac.

Not All Lenders Are Alike

Like doctors, lawyers and yes, Realtors, not all lenders are alike. Some are very good at keeping the process moving forward towards your closing date. As a Realtor, I’ve worked with many different lenders that buyers have chosen to work with based mostly on the best rates offered from many different financial institutions.

As such, I definitely have my own favorites based on the fact that they are really great at communicating with me every step of the way so I know what’s going on the lending side of things. Why is this important?

My work does not end when I find you a house and help you place it under contract. I must continue to monitor your progress with the lender and also act as an intermediary between the lender, the title company, the listing agent and you! That’s a lot to keep track of and things work smoothly when everyone is kept in the loop through frequent updates.

If something comes up and we need to push the closing date down the road by even a few days, I’m the one who coordinates the timeframe with everyone, including the lender, writes up the legal paperwork, obtains the signatures and shares that document with all other parties. I’m also the main point of contact for the listing agent representing the seller, so it’s important that I know what’s going on.

Your choice of lenders can make or break a deal. I’ve seen bad lenders too! Typically, the first red flag is they are slow to respond and don’t keep me updated. Oftentimes, buyers are also left wondering what’s going on. I had this one luxury home buyer switch lenders three weeks prior to close because the previous lender was so disorganized an

Home buying today is much more complicated, working with a buyer agent is the best way to protect yourself in what is easily the biggest purchase in a person’s lifetime. You can’t beat the price since buyer’s agents are paid by the seller, not the buyer in most cases.

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