The Number 1 Reason to Buy a Home Now!

I make the same case to my clients but the other way to look at it is that home prices will have to go down because as you show, rising interest rates will make homes less affordable.  I'm never certain if it's better to lock in great rates or wait for a possible further decline in prices. 

I recommend financing as much as possible with an FHA loan now because they are assumable.  That was a huge thing back in the eighties.  If rates go up and prices then decline, you will be able to sell your home for more because your assumable loan will keep your buyer's payment as low as they used to be. 

Definitely something to keep in mind when buying a home.

Well said and thoroughly explained.  Facts every consumer should know.

I have a feeling they will go up higher than 6%.  After all, we have to remember that the Fed made this prediction....yes, the same Fed that said the "crisis was contained" before it even really began. 

I've heard several estimates that put the government share of MBS purchases at around 80% and find it hard to believe that rates will only increase by one point if demand for mortgage backed securities drops by 80%.  Which also leads me to the conclusion that the Fed will extend the program if rates start to shoot up too much. Hard to say which is the lesser of two evils at this point, but it will be interesting to see how the mortgage market "breathes" once it is removed from life support.

My lender partners have been warning me of a rate hike.  Definitely worth a reblog.

Great post. I think people would be wise to heed your warning!! Thanks!

www.GarrigusRealEstate.com

Lonnie - Nicely stated and laid out here.  I like the fact that you used concrete examples to illustrate the difference with regard to qualification and pricing. 

Hi Lonnie -- If this occurs, inventory levels should rise and sales prices should fall, generally speaking, knowing that each market and submarket is unique.

Thanks for excellent post - am going to re-blog. I also liked Tim's comment #13.

Lonnie, thanks for the wakeup call. this won't be an April Fools joke !

This is really important information for buyers to realize as they consider whether or not to purchase a home.

This is awesome!  So many people focus on the dollar amount up front rather than figure out that interest rates have more to do with anything.  I agree completely. Thanks for the reminder.

Deb

Rates have already started to rise a bit. I have buyers right now that are disapointed each week when rates go up another 1/8 of a percent. None of us have a crystal ball but your comments make a lot of sense.

Very good reason to buy now...but the real number one reason is that you need a house now.  Now is always the right time when it's the right time for you.

We need to remember that unless your an investor you are selling a home vs. a house. When we use this mind set it is always a great time to buy a home. Yes, it may be a great time to buy a house.

Excellent article, thanks for sharing

You are so right. It's all about affordability. There's a lot of emphasis on price, but I always give interest scenarios at various levels to show what will happen to try to reinforce the importance of "sooner than later". The time to pay for the low rates is coming.

Lonnie,

Great post, This is something we all need to consider when advising people who want to wait until later in the year to sell.  As we all know, people don't buy homes based on price, but on monthly payment.

Thanks for this information. Going to re-blog for all my future clients!

Good way to put it Lonnie. I find it a little amusing how so many of the comments are addressing it like you are talking about interest rates ... that's just another thing to add to it. Rates will rise, should rise and should already have risen. How high they will rise and how quickly we do not know but Wise always was more correct than Keynes and we all are certain it will be plaid out in the wallets and bank accounts of Americans quite vividly over the next several months.

One commenter said his mother believes she remembers having an 18% interest rate - yes, that was very possible in the late 70s and early 80s. Could we see them that high again? It is possible. While most of us agree the government should step out of the way and let the market drive the economy they have done such a fantastic job of training the public to trust them and using fear to leverage their Keynesian policies of socialized economics that it will likely take a complete implosion of the market and runaway inflation to open the eyes of the uneducated, untrained masses. 

You have done a good thing here - do more of it. Everyone needs to understand the simple math.