Comparing the payments on a $94k mortgage in '89 at those 10% rates with a mortgage today of $166k at a rate of 4.45%, your payments would be $825 and $837 respectively for a difference of $12. $12!!!
The arguments we hear from buyers is they are waiting for lower rates or they fear prices will drop again. I learned a long time ago that you can't time the market. Economists and professionals have been trying for decades and they'll tell you the only way to know prices have bottomed out is when they're going up.
So you're a buyer and you're waiting for prices to drop another 3%. You're preapproved at today's low of 3.85%. You find a property but want to wait for the seller to drop their price. Rates rise a 1/4 point and you've essentially got a wash because the mortgage payment is going to be the same. If they raise a 1/2 point then you're paying more than had you put in an offer and asked the seller to pay closing costs. You're only at an interest rate of about 4.35% but you've lost a lot of buying power.
Say you're a seller and you're waiting to put your property on the market when prices rise. You're waiting for them to rise 10%. Historically, we've seen prices rise about 4% per year. Our area rose 1.4% last year. That's a long time for the appreciation you're talking about. But I'm going to give you the benefit of the doubt and say you're going to see 5% increases over two years which would give you slightly over the 10% you want but what an amazing market that would be compared to now. Well how many buyers do you think are going to be able to afford that house in 2 years if interest rise 1/2 pt, 1 pt or God forbid 2 pts? That would still be only 6% interest rates but is the equivalent of a 20% price drop for you. The buyers are there. Take advantage.
If you're thinking about buying or selling, give me a call!
