It's the bright side of the bleak real estate market.
"It's hard to see the possibility of losing on a home purchase right now, with these mortgage rates," said economist Dean Baker, who in 2005 predicted a decline in the government's home-price index that now is within 2 percentage points of his forecast. "Prices may go lower, but not by much. Even if they do, you're still getting a good deal."
The lowest mortgage rates on record, coupled with a new Federal Reserve program to reduce them further, are turning housing bears like Baker into optimists. Loan payments on a home financed at last week's 4.09 percent average 30-year U.S. rate would be lower than the bill for a property purchased next year after a 3.5 percent price decline and a half-percentage-point rate increase, a scenario forecast by the Mortgage Bankers Association (MBA) for mid-2012. (The average 30-year rate dropped again this week, to a new average low of 4.01 percent, Freddie Mac said Thursday.)
Assuming a 20 percent down payment, buying a $300,000 home at current rates means a monthly mortgage bill of about $1,158 (excluding taxes and insurance). Delaying a purchase until next year would put the tab at $1,186, based on the MBA forecast for prices and rates. That amounts to an $18,000 difference over a 30-year mortgage for those who wait.
Regardless of the rate, most Americans seeking to buy houses need to qualify for loans. Mortgage applications for home purchases rose 2.6 percent last week, the fifth consecutive gain, the MBA reported Wednesday. Fannie Mae and Freddie Mac, which securitize about two-thirds of new U.S. mortgages, have enacted the strictest qualification standards in more than a decade.
That makes the mortgage process a grueling experience for borrowers like Christine Trendell. She bought a house two months ago in Canton, Mass., a suburb of Boston, where real estate prices fell 25 percent through early this year before gaining 10 percent in the recent quarter, according to the National Association of Realtors.
Trendell said she and her husband, Ben, had to submit a pile of bank statements, retirement-fund tallies, and years of tax returns that stacked to almost two inches high. The lender required them to fax their pay stubs repeatedly to make sure they hadn't lost their jobs before the closing date, she said; they were able to get the mortgage because they have pristine credit records.
"The low rates made it affordable to buy the house, but we didn't know if we were going to be able to get a loan," Trendell said. "Rates don't matter if you can't get a mortgage."
Buyers are still cautious about taking advantage of deals. Sales of previously owned homes were down 31 percent in August from their 2005 peak, the National Association of Realtors reported last week. Neither Baker, codirector of the Center for Economic & Policy Research, nor Karl Case, cofounder of the S&P/Case-Shiller home-price index, expect property bargains to be a cure-all for the worst U.S. housing collapse.
"Houses are cheap right now, but a lot of people are too scared to buy, no matter what kind of deal they get," Case said. "We're bumping along the bottom with prices, but I don't think we're at a bottom in terms of confidence."
Buyers passing up bargains are confounding attempts by Fed chairman Ben S. Bernanke to boost the broader economy and stimulate housing demand. Policy-makers said last week they will commence a third bond-buying program aimed at lowering home-loan rates.
The Matthewses didn't wait to see if rates would go lower. They moved to Bloomington to be near Indiana University, where their teenage son will attend a pre-college program at the Jacobs School of Music. The couple paid $187,500 for their home in August.
Yacov Sinai didn't want to wait, either. He got a four-bedroom, one-story house in the tony Regent Square neighborhood of Santa Monica, Calif., for $1.87 million last month. Prices may fall an additional 4 to 8 percent, he said.
"Next year, when you make an offer on a property, there'll be another 10 people behind you waiting to get in the door," he said. His new house has four bedrooms, a double garage, and a half-circle driveway. He negotiated a 12 percent discount off the list price, a $267,000 savings.
This week on Al's Place: Al tackles the fine art of trapping squirrels humanely. www.philly.com/yourplace.