Cutting to the chase, I think I can safely say that any potential buyer will be kicking themselves 5 years from now if they don’t take advantage of this “unusual” economic situation we have come to find ourselves in. Waiting to buy will turn you into your grandfather. Remember when he would say, “I should have bought as much property as I could, while it was cheap.” As with the stock market, don’t try to time the real estate market.
Here’s an exercise that shows what waiting “for the bottom to hit” might do to a buyer who hasn’t done their homework.
Let’s make an assumption that the prices may still decline 5% more before they start appreciating again. If, while a buyer was waiting for the price on a $250,000 to go down 5% to $237,500, and the interest rate goes up one percent from 5.25% to 6.25%, which is entirely possible, the buyer’s monthly payments will increase almost $79 per month.
For most buyers, the monthly payment to control the cost of the home is much more important than the price paid or even the equity in the home.
Cost of Waiting to Buy…
| Sales Price | $250,000 | |
| Down Payment | 3.5% | $8,750 |
| Mortgage | 30 year 5.25% | $241,250 |
| Payment | $1,332.19 |
| Wait to see if home decreases | 5% | $237,500 |
| Interest rate increases | 1% | |
| Mortgage | 30 year 6.25% | $229,188 |
| Payment | $1,411.15 | |
| Monthly payment increases | $78.96 |
You can see what a difference a rise in interest rates can do, even if the purchase price is lower.
Now…believe it or not, this is not all bad news. Real estate is still the safest investment you can have. Everyone needs a roof over his or her head. Why pass up such a great opportunity to live in “paradise” when real estate is priced at 2001 prices! Shares of Google won’t keep you warm and dry. Prices are low, interest rates are still good, and inventory is there. Diversification has always been the right way to invest. Real estate needs to be in your portfolio. If you love a property and can justify the price, buy it. I can help you with the justification part by assisting you with making the right financial decision. Are you getting a “deal”? If you can’t get a deal in this economy, when can you?
I hope you will come away from this a little more informed. Of course if you have questions, I’m only a phone call away.
Kindest regards,
JoAnn Laird ABR, CRS, GRI, SRES
Broker Associate
Mobile: 970. 946.9700
Office: 970. 731.4065
