Apr

8

Real Estate Market: Buyers On The Fence

Filed Under Buyers |

So you’re waiting out the market? You’re watching closely to home prices and you’re waiting to strike when the market is at rock bottom hey? As a professional in the field, I may have a few things to share with you, at the very least, a few ideas about the market that may help you put things in more of a realistic perspective.

I know I know - I’m a real estate agent so how could my opinion possibly be objective. I’m just writing these articles to get people to buy. Well, if I could possibly hypnotize people through my articles by saying some strange words repeatedly that would become meshed with your subconscious so that you pick up the phone and call me to buy a home…I would definitely do that. However, this article won’t have those hypnotic words. No tricks. In fact, some of the main comments in this article will be from people who are much smarter than I am, that’s for certain.

Let’s start with Susanne Cannon, Director of the Real Estate Center, DePaul University, as quoted in the New York Times.

buyers-on-the-fence.jpgCLICK HERE TO ENLARGE

This is an interesting point Susanne brings up mainly because it fits the description to a lot of buyers out there who are simply waiting it out. However, what’s not being considered is the impact interest rates will have in the decision. Great, nine months from now, a buyer might pay $300,000 for a home that was worth $425,000 two years ago, but at an interest rate of 8.5%.

Take a look at the following graph.
interest-rates-buyers-208.jpgCLICK HERE TO ENLARGE

This graph compiled by Bankrate.com, shows the clear trend in the mortgage market toward a continuing increase in long-term rates. If you asked me if I believe that by the end of the year, interest rates will be over 8%, I would definitely have to say, no way. However, given this “crazy market” we’re in, who the heck knows.

If you buy a house for say $440,000 now and put 20% down, with a $350,000 mortgage now, at a fixed percentage rate of 6%, 30 year mortgage, the total amount of payments over the 30 years would be $755,431.84 with the total amount of interest paid being $405,431.84.

If you buy this same house say, 10 months from now (when the market prices “hit bottom”) for $410,000 and put 20% down, with a $328,000, at a fixed percentage rate of 8%, 30 year mortgage, the total amount of payments over the 30 years would be….$866,426.55 with the total amount of interest paid being $538,426.55.

We’re talking over $100,000 more in costs just to “save” 8 to 10 percent now on a purchase price. It clearly doesn’t add up. Even if you say you’re not going to live their for 30 years and will most likely sell the home 5 to 7 years from now, the cost to you will be more if you wait and take the chance of interest rates being higher.

As a professional real estate agent, based on what I read everyday, see in the market, and hear from other professionals, both locally and nationally, buying real estate anytime between now and the end of the year, price-wise, is a good time. With regard to the interest rates, without a doubt, now is the best time to strike!

As a real estate agent, I will admit, I’m a little biased. Afterall I want people to be out buying, namely my listings or working with me as their buyers agent! However, if you think about the current market rationally, it would be hard to argue with me. And let me remind you that you’re not arguing with just me, you’re arguing with the facts. Interest rates are, and have been rising since the beginning of the year. The trend is upward. While prices will continue in a downward trend, we have really no idea what will happen to interest rates.

If you are currently looking to buy real estate now or in the future, please feel free to contact me at 631.587.1700. You can also read my article Buyers Agency to learn more about how and why you should consider having me work for you! You can also sign up for a FREE listingbook account, with me as your Personal MLS guide!

(c) Copyright 2008 www.tommcgiveron.com

By Tom McGiveron
Licensed Sales Associate
Coldwell Banker Matherson


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3 Comments so far

  1. Tom McGiveron | LI Real Estate | Suffolk Homes on May 31, 2008 5:10 am

    […] time to buy. Low interest rates of around 6% cannot be looked at lightly. I will be posting about interest rates again, and discussing their true value. In closing I’d like to leave my selling readers with […]

  2. Tom McGiveron | LI Real Estate | Suffolk Homes on June 9, 2008 7:46 pm

    […] is the time to buy. Interest rates are low and prices have dropped. My previous article about the importance of a low interest rate is worth reading or reading […]

  3. Tom McGiveron | Long Island Real Estate Market | Suffolk Homes on July 17, 2008 8:05 pm

    […] come out and play or they risk being priced out of the market for years to come. I wrote about the effects of higher interest rates on monthly payments and total interest paid on a mortgage. The effects are […]