Phillip's Blog

If you are trying to figure market timing on making that leap…forget about it! Just like buying stocks or any other investment based on timing your move to a market high point or (in the case of real estate) a low point – it’s a BAD idea. Every expert in any field will tell you: buy when you are ready, not when your “Uncle Joe” thinks it’s a good time to move.

With that said though, you definitely don’t want to buy and then watch the value of your investment take an immediate decline. Fortunately that has never been a real issue to worry about in the Greater Nashville area. While the market may be “down” that is truly a relative term. “Down” from what? In this market, the “down” means that the rate of increase is not as high has been in previous years, on average.

Now this morning, we have the HUGE news that the Fed has cut the Federal Funds Rate 75 basis points or ¾% following an emergency phone conference and one week prior to the regular meeting...the largest cut since 1994. That's THIRTEEN (13) years ago folks!!

While this rate does not have direct impact on mortgage rates, it does have an indirect impact and it’s kind of funny how rates are falling out, relative to the product type. The other day I posted the latest mortgage rate averages which were way down from this time last year. Well, check out today’s average rates as published in the Wall Street Journal:

        30 year Fixed             5.42%
        15 year Fixed             4.93%
        30 year Fixed Jumbo     6.46%
        5/1 ARM                     5.12%
        5/1 Jumbo ARM            5.62%

When was the last time you say an ARM with a higher interest rate than a Fixed Rate mortgage? And when was the last time you saw a 15 year Fixed with a rate below 5%??

Getting back to the original theme of this blog, here are some indications it time to buy:

Inventories Start to Decline: That means the best buys are leaving the market and “best” doesn’t necessarily mean “cheap”. It means the homes with the highest likelihood of profitable resale. The most desirable homes will leave the market first. Here’s the current inventory chart:

Days on Market Decline: this refers to the number of days a home is listed for sale on the MLS and is also known as “DOM”. When the DOM shortens, that signals a coming sellers market. Watch this indicator carefully, it hasn’t started to drop yet, but we are right on the verge. Here is the current Days on Market chart:

Interest Rates Decline rapidly and Mortgage Applications Increase Rapidly: we talked about this earlier with the drop in mortgage rates just since this past Friday. What do you think will happen when the indirect impact of the Fed rate reduction filters down to the mortgage market over the next few days? They’ll be lining up to get money, that’s what. And as we know, when demand increases, prices (in this case, rates) increase.

Prices Remain Firm or Rise: this one is self explanatory if you understand basic economics. Prices are a product of demand. In a tight market, sellers reduce their prices and offer more incentives. If homes sell reasonably well, prices won’t move downward – they move up. It’s about supply and demand. More demand = higher prices. Here is the current pricing chart:

Now is the time to buy a better house while prices are steady (but beginning to increase), interest rates are low, and inventory is still high (but dropping). Move now, before it becomes a sellers market this spring!!