I have heard a lot lately about subprime lenders going bankrupt and the housing market going down the can. They say the next year or so things are going to get worse - at least some guy on Fox News said that. I want to purchase a house within the next 12 to 24 months. Will this mean that I am likely to capitalize off of these people getting foreclosed on?
Short answer - Yes. A “bad time to sell” = “Good time to buy”.
Longer answer - it depends. As long as interest rates remain relatively low, you are in a good position to buy as overinflated home values are adjusted downward. OTOH, if interest rates rise back to double digits, much of the apparent savings in principal will be offset by the higher lending costs.
But that is in general terms. In your specific case, it will be possible to get some pretty good deals if you look hard enough.
Also remember that the more cash you have, the less you need to borrow. If you’re worried about interest rates getting too high, save as much as you possibly can for a downpayment.
Where do you live? What kind of house are you looking to buy? Some areas will be less affected by a bust than others.
A lot depends on where you want to buy. The foreclosures are not distributed evenly throughout the country.
With financial markets, the conventional wisdom is often wrong. I know a family that waited from 2000 to 2006 to buy a house, because they were waiting for the dip that everyone thought was coming. Instead, they finally ended up paying an extra 30 or 40 per cent.
Better to just find a house you like in a good neighborhood with payments you think you can afford.
Down markets favor the buyer. That’s obvious.
But of course you have to have good credit to get a loan these days. Sub-prime lenders will not be knocing on your door any more.
But the warning is not to over-buy. Be sure you can meet the mortgage even if you are out of work for a while. A while being the length of time it takes to sell.
And also, the trend might still be going down before it comes back up.
So, if you either might move in a couple of years, or might be out of work for a period, be prepared to take a bath.
My plan was to save up as much as possible, more than or around 20 percent for sure. I am in Huntsville, AL and the housing market here is pretty good from what I here. No idea on how much I will spend or what I will be looking at. I know I have good credit so the lack of subprime lenders won’t affect me. Something small as in 2 bedrooms since I am single. Anyways, this is several months away, and I was just curious. Thanks for the info.