I saw this graph recently and thought I would share it.
Nothing new here, people have been talking about this concept for years – waiting for prices to drop more vs. the risk of higher interest rates. Well, here it is again, based on a $100,000 loan.
There are two keys questions buyers need to consider right now –
1. How much more are prices going to drop in the market they are looking to buy in?
Few experts believe that prices are going to go down another 20%. It could happen, especially in the upper end price range of each market, but it is not expected for the remainder of the market. Most agree that we are pretty close, within 5-10%, of the pricing bottom.
2. What will happen to interest rates?
Again, no one knows for sure, but most expect that rates will rise above the current 30-year rate of 5%.
So, if prices come down another 10% over the next year, and interest rates go up 1%, there really is no savings on the monthly payment. Sure, you may save 10% on the purchase price, but is that worth the wait and risk?
Each buyer must answer that question for themselves.
There are some added benefits of owning a property earlier than later – tax write offs, benefit of use, potential income, etc. Plus, if you hold onto the property for 10 years or so, 10% really won’t make a huge difference in the selling price.
Just some food for thought.