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Waiting to buy? That decision may have cost you more than 50,000 dollars!

By
Real Estate Agent with High Lakes Realty and Property Management

For Buyers who may have been waiting for the market to finally bottom-out, that time may have already passed.  As a matter of fact, the decision to wait may have already cost the average buyer 50 thousand dollars or more.

 Last Spring I argued that there couldn't possibly have been a better time to buy:

 "If you're waiting for prices to decline to an ultimate low, you may be missing the boat by overlooking other variables that should be entered into the equation at this time...

..It's a great time to buy Real Estate now and not just because of the recent downturn in prices.  Added affordability combined with historical lows for rates in the lending industry, huge selection due to massive increases in available inventory and market forces that are pressuring sellers to be more flexible than ever, are factors now allowing buyers to be nearly ideally positioned..."

Unfortunately, it now appears that the fence sitters who may have stubbornly waited for an even better time to buy than last winter or spring, will now be faced with not only significantly higher monthly payments, but tens of thousands of additional dollars being paid out over the course of their mortgages.

 Interest Rates have gone up and they're more than likely to continue to rise.

 Here's how rising interest rates may have impacted a potential buyer and their purchase: 

 

Source: Bankrate.com

 In January 2008, the average interest rate (nationally) on a thirty year fixed loan was approximately 5.4% for customers with good credit.  Now, (late July 2008) the rate hovers around 6.4 % and will more than likely be higher by the time this article is published.  Principal and interest payments on a $250,000 dollar home would have been around $1400 per month; now that same home will cost the buyer around $1563 a month.  Amortized over thirty years, that amounts to more than $57,000 dollars of additional expense.  (And that's not even considering the lost investment potential of that $150+ per month over thirty years .)

 Although we're all feeling the financial pinch of a slowing economy and rising prices, the efforts made by the Federal Reserve to slow inflation by raising interest rates, may be the very thing a struggling Real Estate market needs least.

 The Wall Street Journal recently stated:

 "...A major economic policy move could come in the final weeks of the U.S. presidential elections. Traders are betting that before November, the Federal Reserve may execute an interest rate hike.."

 Also from Forbes.com July 16:

"..Federal Reserve chairman Ben Bernanke said a 'top priority' for the central bank is to bring inflation to an acceptable level.

'We're going to be responsive to conditions as they evolve,' Bernanke said in testimony before the House Financial Services Committee. He noted concern about commodity-related inflation bleeding into headline inflation... "

The point is that we should expect interest rates to go up with the inflation of other items, and because of that, anyone considering the purchase of Real Estate should carefully factor that into their decision about when to buy.

Prices are down, and may continue to fall, but, pricing alone should not be the only factor influencing a buyer's decision.  When considering that selection is huge, seller flexibility is nearly maximized, and the price of money is still relatively cheap (but getting more expensive,) the potential overall return on investment on Real Estate available RIGHT NOW, is quite possibly at its very zenith.  Whether you're a casual buyer or a full time investor, delaying a purchase now may prove to be a regrettable decision over then next few months and years.  

As I said in March, if your waiting for the best time to buy, please allow your local Real Estate professional to explain why now is probably the best time to be helped down off the fence.  Ten years in the future, when you see the results of a good investment made now, we're confident that you'll be pleased with your decision.

Fred Jaeger is a licensed Oregon Real Estate Broker and an e-PRO certified REALTOR® associated with RE/MAX Sunset Realty Sunriver / La Pine.  He can be reached directly at 541 598-5449 or fred@fredjaeger.com .  More of Fred's material is viewable at fredjaeger.com .

Comments (9)

Michael A. Caruso
Surterre Properties - Laguna Niguel, CA

Hi Fred,

Nice post, I enjoyed reading it and agree!  Good luck on your business and have a great week.  Michael A. Caruso

Jul 21, 2008 07:47 AM
James C. Johnson
Legacy Real Estate - Sioux Falls, SD

Great point - everyone is "waiting" it out to get the best deal.  They don't realize the best deals have already passed them by

Jul 21, 2008 08:05 AM
Associate Broker Falmouth MA Cape Cod Heath Coker
https://teamcoker.robertpaul.com - Falmouth, MA
Heath Coker Berkshire Hathaway HS Robert Paul Prop

Interest rates have traditionally gone up after each presidential election.  This one may have tax increases, too.  Your $50K may be a low amount

Jul 21, 2008 08:06 AM
Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

Fence Sitters, I like that term. What they're waiting for astounds me. They think they have the crystal ball to fore see the future. All we can do is educate them. The rest is up to them.

Jul 21, 2008 08:33 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Fred, great post. I like you attitude. I have been saying and saying the same thing, but for some reason people don't want to listen. I still have people that wanted to refinance at 5% and when it tipped down to there, they decided they wanted 4.75. Guess what? They didn't get it. Must be something about the name, right Fred? lol

Jul 21, 2008 08:47 AM
Jo Olson
HOMEFRONT Realty - Kettle Falls, WA
Retired - HOMEFRONT Realty @ LAKE Roosevelt

Fred, great information - sometimes it isn't always about price when it comes to the best deal. People forget about that word "terms".

 

Jul 21, 2008 10:42 AM
Leslie Stewart
Oregon Licensed Broker with Berkshire Hathaway HomeServices Real Estate Professionals - Stayton, OR
Realtor, ABR, CRS, Oregon Licensed Broker

Fred, Great post and good points.  The Oregon market is so much different than the rest of the US.  I think you hit the nail on the head here...

Jul 21, 2008 11:15 AM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Great point !  We are using that the create urgency with our buyers !  The 10,000 that might be saved on the purchase will be gobbled up and much more with higher rates - I was not acutely aware of how much until reading your post.  Thanks !

Chris Somers   www.thesomersteam.com

Jul 21, 2008 11:20 AM
Regina Lundeen
Delaware Association of REALTORS® - Rehoboth Beach, DE

I'll be passing your blog to the buyer's agents on my team so they can beef up their arguments to their prospects about why now is a good time to buy.  It is ironic that a few years back we were telling seller's to reduce, take that less than stellar offer.  Some did and some are still in inventory wishing that had listened. 

We had a lot of woulda coulda shoulda stories to tell to our sellers - now we will be telling them to our buyers.  Only now it seems like the sellers will still be suffering.

Jul 22, 2008 02:09 AM