Should prospective home buyers wait any longer?

by Tom Tousignant

in Blog, Home Buying, Mortgage Rates, Mortgages

Thanks to Rick Melville, a Sr. Mortgage Planner at Fairway Independent Mortgage in Charlotte for this guest blog post:

Winston Churchill once said that “a pessimist sees the difficulties associated with every opportunity and that an optimist sees the opportunities associated with every difficulty.”

Just for fun I decided to do a little math problem this week. Rates actually hit 4.375% on some 30 year fixed rate programs last week (of course remember – rates are very situation-dependent, and subject to change with market conditions). Can you believe it?! There are people who are on the sidelines waiting for prices to fall further before they make the leap of faith that we have finally hit bottom.

Here’s what that looks like, if they wait for house prices to fall and stabilize while interest rates creep back to the level of just a few months ago (at 5.375%).

• $250,000 mortgage at current rates of 4.375% equals a Principal and Interest Payment of $1248.21.
• That same payment of $1248.21 at 5.375% would only get you a mortgage of $222,906.

In other words, the house they wanted at $250,000 would have to fall another $27,094 before the payment would just be the same as it is NOW at the higher price. Well, that’s another 11%! I’d say there is a greater risk of rates rising than prices falling that much further.

If affordability and payment are important to a buyer, then trying to time the low in house pricing could make for higher payments. For a family who plans to stay in their house for a long while, buying now is the opportunity being created by our current difficulties and WOW!

What an opportunity we have now.

Great points – today’s low rates could be better than a further 10% decline in home prices.  If you aren’t happy living where you are now – the low rates are making affordable homes even more affordable.

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