It was a busy day today. I showed some clients around the mountain (SCHWEITZER MOUNTAIN, that is) and they were duly impressed. They’re great clients and very savvy to the declining market scenario. The question is, how long do they wait to find the bottom of the market. ...and when it arrives, will they realize it?
I certainly am not going to attempt to force their hand in any way. I did need to point out that there is another scenario they need to grasp when making the decision to purchase:
Interest rates play an important role in a buyer’s decision. The bottom may finally arrive next summer but will interest rates remain at today’s prices? If the rates go up 1% (which they are purported to do), then the “bottom” may, in fact be today.
Example:
Today’s $500,000 home loan at 4.75% = $2608/mth (excluding tax & ins.)
Tomorrow’s $450,000 home loan at 5.75% = $2623/mth (excluding tax & ins.)
This assumes the bottom is another 10% lower than today. What if interest rates go up and the market stays at today’s $500,000 price? ...the buyer’s payment goes to $2918/mth.!
Sometimes our buyers forget to look at the consequences of loan rate fluctuation when deciding on the home to purchase. It is good to keep them aware of this side of the equation.
Did my clients write...no. Just another day of real estate on the "mountain".
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