Buy Now or Buy Later?

If you are a prospective buyer waiting to buy until home prices come down further still, then please look at this chart which compares your savings from decreasing home prices with rising interest rates.

Home loan rates have risen nearly 3/4 of a point since early November 2010.  Of course, all real estate is local, but it is possible that higher interest rates and a shadow inventory of bank-owned properties could cause further price declines. (Another alternative is that an improved economy and employment picture stimulates home demand and keeps prices stable, despite higher interest rates.)

But, let’s say, given the confluence of economic factors we’re facing, that home values do decline 5 % over the next twelve months, but interest rates increase by 1%.  Not an unrealistic possibility.

What is the long term affect for a home buyer trying to decide whether to buy today or to buy later?

The table below considers a $300,000 purchase price with 96.5% FHA financing at today’s interest rates, verses the possibility of a 5% reduction in home prices (a $285,000 purchase price) with a 1% increase in interest rate, and considers making the same monthly payment on each loan.  I’ve highlighted in red the key takeaways of this scenario after year ten and through the life of the loan.

Take a look at the result by clicking on the image below – you will be able to view it larger.

Thank you to Glen Bremer of Alpine Mortgage Planning for this article and information.
Glen Bremer, Mortgage Advisor, MLO-254235
Office: 503-718-9856
Cell:      503-502-5373
Fax:      503-718-9857
gbremer@alpinemc.com
www.alpinemc.com