Rate vs. Price Reduction
This is a great blog post by Kevin describing the cost of waiting for a price reduction on that great listing you want, versus paying more because the cost of money goes up!
Since the Fed's Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings...and rates overall are off their lows. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could cost more money in the long run.
Here is an example: Let's say a home buyer finds a home that he likes for $300,000. The buyer wants a better deal on the home, so he waits until the price has dropped by $10,000. However, during that waiting period, rates increase from 4.25% to 5.00%.If the buyer planned on putting down 20%, the monthly payments at the lower amount but the higher rate would be about $65 more per month. Over the life of the loan, this buyer would actually pay $23,000 more in interest all to save $2,000 upfront (the difference between 20% of $300,000 and 20% of $290,000).
This is of course just an example. However, home prices are already very affordable...and rates are still low for now - but they did go up anywhere from 0.25% to 0.50% depending on the product in the last couple weeks. In the end, waiting for a home price to reduce may end up costing a buyer much more in the long run.
Kevin Kueneke, NMLS # 284800
Sr. Loan Consultant, Direct Lender
Primary Residential Mortgage, Inc.
1000 Aviara Parkway, Suite 110 | Carlsbad | CA | 92011
Phone 760-500-1919 | Fax 619-419-2324www.activerain.com/blogs/kkueneke | kkueneke@primeres.com
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