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The Truth Behind the Numbers
Many potential homeowners are in a state of indecision when it comes to making that big purchase. Unable to pull the trigger after witnessing the catastrophic events of the past few years, many are waiting to see if the estimated 5-10% drop in real estate prices is really going to happen. The main problem with that theory is this: Who really knows if there will be another drop in real estate like some are projecting? We could very well be at or near the bottom already. I personally believe that we will see another small drop in the next year or two, but when you take into consideration the low interest rates, the possibility of even a 10% drop shouldn't matter to today's homebuyer.
Let's take a look at the numbers:
10% price drop -
$200,000 @ 4.452% (todays rate) - $1410.00 (PITI)
Let's say that the market takes another 10% hit this next year. That $200,000 house would be worth $180,000. Now, what if the interest rate goes up one just one point?
$180,000 @ 5.452% - This would leave you with a payment of approximately $1379.00 (PITI)
$180,000 @ 6.000% - This 1 1/2 point hike would ... more
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