Rates Up  Vs Values Down

Buyers are getting off the fence, my circle of influence woke up.  Why?  Could it be all the play I've given with the values taking a big hit the last three months.  The thought that rates will be forced up by inflation. 

When I'm asked what I think the market will do, I respond I don't want to be rude but let me answer that question with another question.  What do you think will move faster?  Rates going up or values coming down.  I could argue (converse) a number of ways depending on how you look at the data. 

In short here is why I think it is the best time to buy.  Values have dropped 2-7% per month the last few months simply because people needed to get out and the buyer pool simply could not afford the prices.  We have seen a 35-55% drop in values from the high point.

The chart below shows that the feds cut the rates 2.25% over the last year, yet the interest rates on a 30-Yr Fixed dropped only .11%.  Fed discount is 3.5% now.  Inflation will likely force rates to increase.  I believe this will cause values to drop, but not like the in the past so...

If values drop 10% more and the interest rate increases .5% over the next year, a home buyer will pay the same amount for the home over 30 years.  Saving nothing by waiting, buyers feel now is a better time because we have more to choose from. 

Can anyone add to or correct any thoughts here?

Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

Brian Sharkey can be reached at All Florida GMAC Real Estate at 772-335-1995 ext. 192 or via email Brian@BrianSharkeyRealEstate.com   http://www.briansharkeyrealestate.com