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  • March 2011
    M T W T F S S
    « Feb   Apr »
  • Mary K. Lenahan, J.D., Realtor

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It’s Still a Good Time to Buy a Home

Altadena Home, Woodlands Neighborhood

Altadena Home, Woodlands Neighborhood

If owning a home is right for your family, you have the down payment, and ability to qualify for a mortgage, then there is no doubt, it’s a good time to buy.

For those cautious buyers who are analytical in their approach to buying, the biggest question today is whether to buy now, or wait until the housing prices drop lower or  hit “bottom”.

An important issue to consider is:  What is the cost tradeoff of waiting to buy a home at a lower price, but at a higher interest rates?  Information indicates that interest rates are going up and will continue to do so.

Interest rates are currently around 4.75% for a 30-year fixed mortgage.    A few short months ago, the rates were at 3.75% (4th quarter of 2010).   That 1% interest increase represents a $263.00 per month increase in mortgage payments on a $450,000.00 mortgage.

If we also assume that the house price dropped 1% thereby resulting in a lower mortgage of  $445,500 (instead of $450k), and the interest rate still went up 1% to  4.75% , your monthly payments would still be $237.0  more than if you had bought at a higher price (1% higher) and lower interest rate (1% lower).    By buying now you can not only save a significant amount of money on your monthly mortgage payments, but you can pay yourself for significantly increasing your standard of living.

Economist Emily Trinks believes waiting to buy at cheaper home prices can result in costing you more due to the higher interest rates.   To help home buyers to visualize the trade-offs between lower purchase prices and higher mortgage interest rates,  Ms. Tinks provides a chart based on the current  4.7% rate.   The chart shows percentage by which your monthly mortgage payment will change as a result of movements in both home prices and mortgage rates.

For more information about this trade-off, ask you Realtor.  If you don’t have one, call, text or e-mail me to learn more about this trade-off as well as the many other cost-saving programs we offer our Buyer


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