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Fence Sitters Get Off the Fence!

Well to those in the industry it was only a matter of time till that one of the greatest incentives to buy right now is slipping away. That's right, Low Interest Rates! Unfortunately we are seeing interest rates on the rise again and where they will stop is anyoneguess. I have had many lenders inform me they would not be surprised if rates were above 7% to 8% this time next year.

Now if you do not know the golden rule, here you go. It is the 1 to 10 ratio.This means for every 1 point interest rates go up, you lose 10% of buying power.

Example- Lets say you were qualified to buy a $150,000 house right now at 6% interest. If and when rates go up, say to 7%, you will only qualify for a $135,000 at the same payment as the $150,000 house. (Bummer isn't it!)

So if you are a Real Estate professional reading this blog, this is a great way to motivate potential clients or those who are SITTING ON THE FENCE.

Posted by Peter Baiardi on 06/10/2009 02:33 PM

Comments (4)

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4 Comments on Fence Sitters Get Off the Fence!

JUN

Excellent point. I once had a heated discussion with a gentlemen about interest rates and home prices. His philosophy was that he would wait until interest rates go up and then he would buy because the result would be a decline in prices. It wasn't until we whipped out a calculator and did the math that he realized how dangerous that thought was to his ultimate goal of home ownership.

Thanks for the information. I have a few out of state "fence sitters" who are a little skeptical about jumping to the great values we have here in Florida; this may be a way to jar them loose.

Unfortunately, you are right, Peter. And where does that leave us? Inventory will increase, not decrease. Fewer people will qualify to buy so the $8K tax credit will be worthless. We will find ourselves right back in the same hole we were just starting to climb out of. My experience is that "fence sitters" like it right where they are. I have little success converting them, perhaps because they annoy me so much. It's time to buy, and it isn't going to last long.

Thanks for your timely reminder! The shift is on.

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