I'd like to preface this blog post by saying that in the short term, I think that housing prices will drop again before we see bottom. The story will continue to be about supply and demand. Right now we are in a bubble where demand (fueled by hungry investors with cash and buyers trying to take advantage of the tax credit) is up and supply (dimished by last winter's moratorium on foreclosures and a pause in foreclosure processing as lenders give HAMP a try) is down. These factors will change in the coming months as I have outlined in previous blog posts: the tax credit expiration will diminish demand, and a wave of defaults as Option ARM loans reset will increase supply.
That being said, if you are planning on purchasing a house and holding on to it for the long-term--either as a permanent residence or as an investment--now is a great time to buy! While we are not at the bottom of the market in terms of price, we are probably at the bottom in terms of interest rates. This week, Freddie Mac announced that 30-year fixed rates are at an all-time low--averaging 4.71% nationally. Rates will not stay this low for long. As I blogged about last week, the Fed's Mortgage Backed Securities (MBS) Purchase Program is due to end next March. This program is what has kept mortgage interest rates low so when it ends, mortgage interest rates will start to climb.
