If you've been sitting on the real estate sidelines for months--as a potential buyer, seller or both--you ought to think hard about getting into the game in the next four to eight weeks.
That's not sales hype.
It's the considered opinion of several top mortgage-market economists. They believe that we're in a cyclical downturn in interest rates, and that the cycle could play itself out by late spring, 1982. Between now and then, says James Christian, chief economist for the U.S. League of Savings Associations, "we should enjoy gradually moderating interest rates," a temporary "window" for lower-cost money.
Not bargain-basement interest rates, mind you. Not 10 or even 12 percent mortgage quotes at your local bank or savings and loan association. But better rates than we've seen during most of 1981, perhaps to the 14 percent level for conventional and adjustable-rate loans.
By mid-1982 or sooner, according to the scenario shared by Christian and other economic analysts, the mortgage-market opportunity will be over. The current national recession will be waning, corporate and federal government demands in the capital markets will expand, and interest rates will begin climbing again.
Home buyers, builders, sellers and brokers, in short, will be back in trouble.
So, you ask, all we've got to look forward to is 14 percent mortgage rates at best, and even those won't last for more than a matter of weeks? Why bother to get off the sidelines?
For a couple of good reasons.
First, if you truly need to sell a house or buy one, the "window" of moderating interest rates this winter may offer the best opportunity to do so in months. January or February of 1982 may prove to be a more advantageous period to buy or sell than late spring, when the capital markets may be heading the wrong way.
Second, there's no reason why you should assume 14 percent money is the best that's going to be around. Forget the S&Ls, banks, and other conventional mortgage sources during the coming "window" rates. Turn to the other resources open to you, such as buy-downs, seller financing, and replacement loans.
Use the moderation in money markets as a tool to get yourself a better deal, whether as buyer or seller.
Here are some quick tactical points to bear in mind:
As a prospective purchaser this winter, you should be able to ask for a lower rate on a buy-down mortgage from a seller or home-builder than you could have gotten this fall. (In a buy-down plan, the seller subsidizes your rate from the prevailing market cost of money down to some lower rate, often for a period of two to five years.)
It only stands to reason that if money costs drop by 3 to 4 percentage points -- a decline that has already occurred in the short-term capital market -- sellers' buy-down rates to the consumer should drop by several points as well.
The seller or builder who offered a subsidized 14 percent rate three months ago ought to be willing to offer an 11 percent buy-down rate next month. The individual seller who offered a two-year, 12 percent buy-down last fall ought to go along with a five-year buy-down in early 1982.
Some attractive low-rate FHA-VA 30-year buy-downs already are available from mortgage brokers in major cities. Quotes available the first week of December were in the 13 1/2 percent range (with 5 to 6 subsidy "points" paid up front by the seller). Even better buy-down deals in FHA-VA loans are likely in coming weeks for alert purchasers and brokers.
Buyers should also look to specialized secondary-market programs in the coming eight weeks. The Federal National Mortgage Association's ("Fannie Mae") "seller-refinancing" program -- which offers cut-rate replacement loans on houses financed by the corporation -- will probably be dropping its rates nationwide. Your local mortgage lender or real estate broker should be able to tell you whether a house you want to buy or sell qualifies for Fannie Mae's attractive program, and at what rate.
Keep your eyes peeled, too, for adjustable-rate replacement loan programs for S&Ls and banks, as well as special discount-financing plans using tax-exempt All Savers certificate deposit proceeds.
To sum up, a sound strategy for buyers and sellers in the coming two months is this: Look hard for the genuine opportunities you can negotiate for yourself, thanks to the modest drop in rates. You're not going to find the 9 percent loan you've been dreaming about for three years, so don't have wild expectations. But you may very well walk away with something rather nice in the range of 11 or 12 percent.