Fed Stimulus Can Help You Buy Or Sell A Home Right Now

Post image for Fed Stimulus Can Help You Buy Or Sell A Home Right Now

Looking back to 2009 the Home Buyer Tax Credit was created to help the crippled housing industry to get back on its feet. Twenty-five billion dollars was spent as a short-term shot in the arm to jumpstart the housing market by helping hesitant home buyers to get off the fence. Just a couple of months after the credit had expired, the National Association of Realtors reported that homes sales dropped 5%.

In September of this year, the Federal Reserve announced its launch of another economic stimulus plan known as QE3, which consists of a record-breaking $40 Billion per month. The plan was created to buy mortgage-backed securities in an effort to support the sagging housing market. Unlike the previous one-time pumping of $25 billion into the economy, the Federal Reserve plans to keep buying the securities at this pace to keep interest rates low artificially.

Those home buyers who jumped at the chance in the 2009 Tax Credit were already planning to buy, but what does this new stimulus mean for the 2012 Home Buyer? It means more buying power for practically nothing due to continued low rates. Take the following example into. With a monthly payment of about $1030/month you could either buy a home for $225,000 at 3.65% or purchase a $200,000 property with an interest rate of 4.65%. With a 1% point difference in rate the buyer has $25,000 more buying power for basically the same payment expenditure.

For those who wish to sell their home and convert to a lower house payment on their next home, they will be able to purchase the same value home aa well be able to save hundreds of dollars a month simply by taking advantage of historically low interest rates. Both sellers and buyers have a wonderful window of opportunity right now and should not lose out on the impact of increased buying power that low fixed rates offer.

Once the rates go up, the buyer will have to settle for lesser, cheaper homes just like they did after the tax credit expired in 2010. By taking action now and not waiting around, seller can benefit from getting more for their homes than the will in the long run if they decide to wait it out. And in an election year, which is always followed by a year of changing policies, it could be safe to assume the life-span of the current $40 billion per month stimulus may be short.

Remember that the housing market rapidly declined after the 2009 tax credit ended and sellers had to drastically reduce their prices to sell. When this stimulus ends, interest rates will rise rapidly and over the course of time and sales will likely drop significantly forcing buyers to spend less. Now is the time to take advantage of the lower interest rates in a generation.

Don’t wait until the traditional real estate buying season of next spring/summer rolls around as it may be too late. Once the stimulus has run its course, it may be a long time before the make is again optimal to maximize your investments.

Leave a Reply

Your email address will not be published. Required fields are marked *