Price vs. Cost -- Fran Campbell Team Real Estate
In today’s real estate market, buyers often ask if they should wait for the market to bottom out or should they buy now. The answer is it depends on if you just want to get the cheapest price on a house or if you are more concerned about what your costs will be over the long term? There is a big difference between “price” and “cost.”
The question buyers should be asking is “can I afford to buy at the bottom?” What happens to your buying power if interest rates go up? (and they will!)
On the purchase of a median priced home at $250,000. If interest rates go up by just 1/4 of one percent (.25%), you will need to earn an additional three percent (3%) in income to qualify for the same $250,000 house. If you don’t expect your income to go up by 3%, then you must purchase a home priced 3% less. What if rates go up 1, 2 or 3 percent while you’re waiting to “time the market?” What will you actually save?
We know that mortgage interest rates are at historical lows and will be going up. The window of opportunity for low rates may be only opened slightly longer. So, if you are thinking of buying your first lake property, a move-up property, downsizing or an investment property, right now may be your very best time to do so. Otherwise, it could end up costing you more…a lot more as rates begin to climb.