Buyers need to know and we need to educate people that if interest rates go up just one percentage point, to six percent, as the New York Times suggests analysts are predicting, that will raise the cost of purchasing a home and wipe out a $10,000 decrease in price. Some buyers are sitting on the fence right now, concerned that prices still might fall. They mayfall a little more, but trying to time the market will cost Buyers dearly.
One thing propping up the market has been the Federal Reserve, which has been buying mortgage-backed securities to keep interest rates articicially low. As the Fed begins to curtail its purchases in the next few months, rates will become less appealing. Analysts predict rates will rise to at least 6 percent from the current 5 percent.
In reality, even if prices fall another ten percent, if interest rates rise one percent, the buyer's monthly mortgage payment will actually be higher.
Help me get the word out that if Buying should happend in the next 120 days! We must educate the potential Buyers that it is more than just price that makes a good deal. Instead, they should examine cost, which is made up of both price and FINANCING. I urge you to work through a trial balance sheet with every prospect and provide a +/- 10% price decline against a 1% interest delta worksheet. You may shock yourself.
* Sources Wall street Journal and Setve Harney
