Homebuyers: Afraid of Buying a House?
John loves his job, loves his salary, but doesn't feel he and has enough job security to buy a house. Insurance reimbursements to physicians are declining, he says, and Medicare reimbursements are a month by month patch. His wife has an MBA and is currently working for Neiman Marcus in downtown Dallas. The Jones want to grow their family and need more space -- a bigger yard and more closets. Interest rates are low and Dallas home prices are the most reasonable they've been in years. But the Jones are not budging. Why?
"There's too much uncertainty," says Sheryl. In fact, she is so concerned with her job working for a luxury retailer the couple asked us not to print their real names.
The Jones know they won't be making much off the sale of their $250k duplex, IF it sells. And John is concerned they won't be able to obtain financing for a trade-up.
"We will be talking a jumbo loan," says John, "and at least 20 percent as a down payment. On a $600,000 home, that's a whole lot of cash for someone like me with huge medical school debt."
The Jones have a lot of company across Texas and the U.S. Fear of buying has infected the market and is spreading like a contagious disease to the point where even professionals with great jobs do not want to buy. Home sale are even down about 25% from last year, even after the jump-start of the first time home buyer's credit. Agents everywhere just shake their heads and try to deal with this new "fear of buying" trend.
Lawrence Yun, chief economist for the National Association of Realtors says it is only natural that buyers feel this way. He compares it to the stock market -- people, he said recently, are just waiting for better deals?
In fact, home sales are down by about 25 percent from last year, which means a lot of buyers are sitting on the sidelines.
"I wish people would understand that interest rates are so low now, they cannot possibly go lower," says Ryan Craig, senior loan officer with Dallas-based 4Trust Mortgage, Inc. "If buyers are holding out for another price dip, that dip could be wiped out by another percentage point or two increase in interest rates."
But neither Dr. or Mrs. Jones are buying the interest rate emergency. Or great deals. They saw a great
"I'm OK with interest rates being a little higher," says Sheryl, " if the economic indicators show improvement."
She looks at unemployment and manufacturing production as well as what people spend for economic barometers. Since she works at Neiman Marcus, she sees sales first-hand -- shoppers, even the wealthy, think very carefully about purchases now. And both Jones know capable people who have been out of work for 24 months.
The new financing rules also impact the Jones' decision to stay put. Knowing they will have more skin in the game, they don't want to jeopardize a wad of cash into what could be a depreciating asset should houses prices decline further. Even if prices do not decline further, do they really want to stash cash into a flat asset?
What signs of economic health might nudge John and Sheryl into signing on the dotted? Knowing what Medicare cuts and health care reform will do to John's paycheck; an easing of the credit markets so that when you apply for a mortgage, you get it; and more jobs -- steady improvements in the unemployment rate.
Even if they find a home that absolutely grabs their hearts, John and Sheryl are avoiding emotion, or at least trying to.
"We might cry if we lose it," says John, who grew up in a 2,700-square-foot home in Englewood, N.J. "But we'll survive."
For more on mortgages and related topics see these AOL Real Estate guides:
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- Mortgage Jargon in Simple Terms
- How Much Home Can I Afford?
- How to Buy Foreclosures
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