Interest rates and low inventory continue to be a thorn in many people’s side right now, but if you desire to buy something now or in the near future here are some things to keep in mind:
- An ARM (Adjustable Rate Mortgage) may provide a better interest rate play than the typical 30 year conventional mortgage. Of course, you will likely want to refinance before your ARM’s initial rate increases. An ARM could also make sense if you are planning to buy and then sell again in the near future. For example, if you are only planning to stay in a home for 4 to 5 years, a 5/1 ARM could make more sense than a 30 year conventional mortgage. As a “rule” of thumb it likely doesn’t make sense to re-fi until you can get into an interest rate that is 2% less than your current rate.
- As we see interest rates slowly creep down, my prediction is that inventory will still remain low enough that prices will likely increase as demand increases due to lower interest rates. There are currently a good number of buyers watching the market and rates – the pent up demand – and so the trick will be to get in at a lower rate before prices increase. Of course, this too is where an ARM may make sense – try to get in at a lower rate than a 30 year conventional before prices and demand increase and then re-fi once rates drop to where it makes sense. Of course, there is an affordability issue at play and prices may not be able to increase by much.
Of course only time will tell as to where all the cards land but we have to do our best to predict what will come as the Feds shed some light as to what is to come in the New Year.
Looking to buy or sell on LBI? Call me at 609-300-3899.
Email: lbideidre@gmail.com
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Website: lbideidre.com