Today I received a question from one of my clients. It is a question that I get pretty often. i am posting this here in the hopes that my answer will help not only my client but other potential home buyers as well.
The question from my buyer was basically, why should I buy now? With the market being down maybe I should wait a year and then look into buying.
Here is my response..
Here are a few thoughts. Right now interest rates are as low as they have ever been. They are floating around 4.75%. A year ago everyone was rushing to refinance and get 6% because we thought that would be as low as they go. All the signs are indicating that we really have hit the bottom of the interest rates and they are starting to go back up. Let's put some numbers to this thought.
I used a mortgage calculator on
kw.com. If you were to buy a house at $150,000, put 3.5% down, over 30 years, property tax and insurance both at $1,500 each, and a PMI of .52%, the monthly payment would be $1180.57 and your total interest over 30 years would be $167,675. Take the same exact variable and change the interest rate to 4.75% (where it is now) and the new payment would be $1067.81 but the interest would be $127,080. Not much difference each month but over 30 years that is a difference of over $40,000. What is the point of all that? Hypothetically speaking if you were to wait one year to save up money you could lose quite a bit of money if the rates go up. Does that make any sense?
Another thought about waiting involves housing inventory. Right now there plenty of homes on the market and people are willing to negotiate. You may take a small hit on your house but since you are buying a more expensive home you will be coming out ahead in the end because they are taking a bigger hit. For this reason, if you were to sell your house now and then buy later you could be losing on both sides. You might sell your house for less and then in a year or two we could be in a seller's market where home prices go up and seller's become less negotiable. You would have less houses to choose from and pay more for the one you do choose.
Basically, in regards to these last points I am saying we don't know what will be happening in the market in a year or two. The market isn't great right now but it isn't terrible either. At least we know what we are dealing with now. Inventory (choices of homes) is high and prices are generally down. A great time for you to be buying.
author's note : <<My client, a single woman, also had some concerns about taking care of an older home she is looking at.>>
"Home maintenance for the single woman". That sounds like the title of a really good book I should write. This is where the power of a good trustworthy handyman comes in. I find from talking to people that woman, and men, will spend so much time and energy trying to fix something themselves and end up tired, frustrated, and with a poorly done project. However, pay someone trustworthy $50 bucks and it is done and looks great. If you pay attention to the person while they do the work, that is even better. You will learn how to do it and not have to pay someone again next time. That is how we learn right? It really isn't that much different in an older home. You just might see the handyman a little more often. ;-)
Thank you for taking the time to read this post. I hope it helps you in some way.
Chris Brown
Keller Williams Realty
Knoxville Tennessee
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