Postponing your Home Purchase while you hope for values to Decline Further May Price You Out of the Market

I believe the likelihood of rising interest rates makes purchasing now a better option than waiting and hoping for further potential value declines. Simply stated, there is a greater possibility of interest rate increases than potential value declines. Even if the price does decline, the interest rate increase may result in your loan payments being higher than you are comfortable with or for which you qualify for today.

To make the comparison simple, let’s assume you a considering purchasing a $650,000 property with a loan amount of $500,000. With a 30-year fixed-rate loan at 5.5%, the monthly payment is $2,839. Many real estate experts are forecasting that Real Estate prices are at or near the bottom of the market interest rates are going up. Let’s examine your payments if you waited a year to purchase and values did decline 10%. If interest rates have risen as expected to 7%, your payment on a $450,000 loan is $2,994. This is $155 more! A 1.5 percent increase in rates to equates to a 15 percent price decline, and a 2 percent increase necessitates a 20 percent price decline to qualify.