12/12/2008

The Cost of Waiting to Buy


I couldn't possibly say this any better, and I've been saying it in the past in several different ways, so I'm going to give you Pat Zaby's article on the topic:

Cost of Waiting to Buy by Pat Zaby


The financial news is full of stories warning about the inability to predict the bottom of the stock market. A 40% decrease in stock prices in one year have uncovered some great values available for investors and buying them at their absolute lowest price will not make much difference for the people who hold them for a while.

Home prices are very much the same. There has been a correction in the market and prices are down in most parts of the country. Combine these with the attractive rates currently available and it is a bargain that everyone will look back on saying that "this was the best time to buy."

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.















Or, read on about Warren Buffett's response to the current economic situation, where he says he's never seen people so fearful as now, BUT, he's buying.

3 comments:

Active Adult Communities said...

The market has already touched the bottom, I don't think it's still going to go further down. In my point of view this is the best time to invest in the real estate, the market is only going to rise from here.

Anonymous said...

My question is, why do say it's a good time to buy because rates are at an all time low? Doesn't that mean they can only go up. And when interest rates go up, doesn't that mean that it cost's more for the monthly payment, so you can't buy as much house, which would hurt appreciation in the future and make it harder to sell in the future when rates are higher? What gives.

Julia Huntsman said...

Hello Anonymous,
If you get a 30-year fixed rate now, your interest rate won't go up. It remains the same until you refinance to a new loan, or you sell. Buyers and sellers have bought and sold properties in all markets, including when interest rates were as high as 16%. What matters is the overall profile of the buyer and their affordability, plus the overall condition of that particular market.

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