@Cobweb wrote:
Mark, congrats on your awesome credit scores! I know about the loan continuing to report as a positive. What I was referring to was the 10% of my score that has to do with credit mix. It sounds like w/your 815+ scores as an example that would be a non-issue.
My husband and I have talked more about purchasing since I first posted. We both believe the market is in for a drop (in home sale prices) over the next year. We are leaning toward waiting it out. It is tempting to buy while interest rates are so low. One added issue for us that isn't typical - my dh is AD military. So, we have to think about the possibility that we will only have the house 5 yrs vs. 10-15 or more before selling.
Thanks for your response.
Yes, there's a ton of shadow inventory that will start to see the light of day via foreclosures and short sales in the coming year, which is why I'm waiting until next year as well. I've actually been waiting since 2005 to upgrade to a house from my condo, when I knew we were in a bubble and people laughed at me for warning them not to buy. I was Chicken Little to them at the time, but the past 5 years have proved me right. Now i just need all those unqualified buyers who bid up the prices on those of us who were prudent to get foreclosed on in a timely manner in order for me to go back and buy the house that was rightly mine to begin with (minus the inflated price).
It really depends on what part of the country you're planning to buy in as far as what type of downward price correction you'll see in the coming year. Anywhere within 45 minutes drive from the coast in California still has a ton of price correction to go (20-40%). Places like the Inland Empire are done correcting, since they're already down 40-60% from their 2006 bubble top.
As far as interest rates going up, there's two important things to note:
1. Interest rates won't go up until A) The Fed starts to worry about inflation spiralling out of control or B) the Economy recovers. These are non-issues since we're actually in danger of deflation and the economy isn't recovering, especially now that last year's stimulus funds are almost completely spent.
2. If interest rates go up, home prices will drop to meet people's income servicing requirements on a monthly payment basis. It's always better to pay less for a house with high interest rates because you can always refinance later when rates drop. If you buy a house with an inflated price when interest rates are low, when interest rates rise, your house price will decline in order to allow people with a similar income as yours to purchase the same house. So in your case where your husband is AD military, you want to be completely mobile, which you won't be if you buy a $200k house with a 30 year fixed rate mortgage at 5% with a monthly payment of ~$1,100. If 5 years later interest rates go up to 8% on the same mortgage, then your house will need to sell for $150k in order for someone to be able to buy it and still make a ~$1,100 monthly payment on it. Trust me, people focus on the monthly payment, not the price of the house, or the interest rates. One or the other has to give in order to adjust for people's income.
