Why Buy Now When Home Prices Might Drop?

Interest rates have again fallen to near 50 years lows!

A borrower, who could purchase a $480,000 with 20% down today, would make the same monthly payment as a borrower who buys a $400,000 home with 20% down and interest rages rising 2% to a more traditionally average rate of 7.5%.

In other words, if home prices remained the same and interest rates rise 2%, the borrower will experience a loss of $80,000 in purchasing power!

Similar scenarios:  

$71,000 Sale price today at 5.5%; will get you $600,000 if rates go up to 7.5% (a $110,000 loss in purchasing power!)

$945,000 Sale price today at 5.5%; will get you $800,000 if rates go to 7.5% (a $145,000 loss in purchasing power!)

Attempting to try and time the market and hit the exact perfect time to buy could cost you tens of thousands of dollars in purchasing power, if interest rates rise during a decline in housing prices.  Consult your mortgage professional to get more specific numbers on your individual scenario.

Walt Ker, of Tower Funding, is the author of this article.  He can be reached at 661-287-9120 Ext. 712.