The Potential Cost Of Waiting For 'The Bottom"

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I love this chart that the Zillow research team put together which illustrates how it could actually cost money to wait for another small decrease in home prices, based on the projected interest rate increases.

You can read the full article here, entitled, To Wait or Not to Wait: Financing versus Purchase Costs.

The article uses the example of buying a $200,000 home now, verses waiting a year.  In the first week of February 2011, the Zillow Mortgage Marketplace was showing a 30-year fixed rate mortgage at 4.7%. For someone with good credit, who is able to put 20% down, and locks a 4.7% rate on a 30-year fixed rate mortgage, the monthly payment would be $830.

Say this same person waits, believing values may fall another 6% in a year (so paying $188,000 for this same home).  It is projected that the 30-year fixed mortgage will be at 5.2% by  Freddie Mac's forecasted average for 2011.  Now the actual monthly payment goes to $826 with a 20% down payment. That $12,000 savings achieved by waiting to buy later at a lower price translates to just $4 a month less in a mortgage payment, as much of the savings is offset by higher mortgage rates. Also, this doesn't take into account tax saving that would have been realized over the year with the mortgage interest deduction.

Here is the full chart to play with what it may cost to wait, depending on what you believe the market is going to do in the next year:

buy or rent


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Re-Blogged 1 time:

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  1. Spencer Rascoff 04/05/2011 09:04 AM
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Gerry Michaels
Glasswork Media Arts - Gettysburg, PA
GettysburgGerry Social Meida

This is really good stuff, I am going to take a closer look and hit up the article. Thanks for sharing

Feb 25, 2011 01:04 AM #1
Andrea Geller
HOT PROPERTY® The Chaz Walters Group at Coldwell Banker Residential Brokerage - Chicago, IL

Great information. It is all in the numbers. Forwarding to some buyers. The catch in this is so many of buyers now are paying cash! 

Feb 25, 2011 01:18 AM #2
Melissa Brown
Helen Adams Realty - Charlotte, NC
Realtor - South Charlotte NC Homes for Sale

Sara, this is a really great blog post.  It's amazing how interest rates/home values interplay.  Wish the re-blog thing worked, but I'm suggesting this for a feature!

Feb 25, 2011 01:28 AM #3
Patty Keller
AnotherME, LLC - Atlanta, GA
AnotherMe - 770-414-9393 - RE Virtual Assistant

Sara...this is right in line with my quote du jour ..."A year from now, you'll wish you'd started today!"

Feb 25, 2011 01:30 AM #4
Ken's Home Team LLC. | 360.609.0226 | Portland, OR & Vancouver, WA Real Estate Team
Ken's Home Team LLC. - Vancouver, WA

very  good chart, people like visuals it will help them make better choices

Feb 25, 2011 01:43 AM #5
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

Buyers need to understand the only thing they know today is what the rates are and what the prices are...anything else is a gamble!

Feb 25, 2011 02:08 AM #6
Sara Bonert
Zillow - Atlanta, GA
Real Estate Internet Marketing

Thank for the comments. There are a lot of ways to view various numbers, but at the end of the day it is all about how much you can afford to be coming out of your pocket each month.  That is why interest rates (unless you are a cash buyer!) are an important consideration.

Feb 25, 2011 02:11 AM #7
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

Yes Sara, & we all know few cash buyers are in today's market.

Sara what is your view on zillow & claims of double standards it has, & is it right to let a few users in zillows website to roam with behavior that's not permitted, allowing the group of users to cyber bully.



Jon Kolsky


Feb 25, 2011 04:37 AM #8
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease


Excellent info!  I believe we are at or darn close to bottom with much less inventory coming on in Atlanta for the areas I work.  (It's a big city, but I am more in town.)  So, this really could effect people quite a bit with a larger interest rate. 

All the best, Michelle

Feb 25, 2011 09:06 AM #9
Sara Bonert
Zillow - Atlanta, GA
Real Estate Internet Marketing

Good to hear Michelle - I just moved to Atlanta three weeks ago!  We are just starting to narrow down where we'd like to end up more permanently one day in the city.

Feb 25, 2011 09:38 AM #10
Karlye Mickley

Excellent post Sara!

Feb 25, 2011 02:41 PM #11
Dan Cheek
Baltimore, MD
Internet Lead Management

Great stuff, Sara.

I'd like to add that its advisable for agents to carefully think about how they present this kind of information to their clients and prospects. Oftentimes, we espouse a "buy now" message, which can come across as self serving if that's all we are (perceived as) saying.

Mar 01, 2011 12:42 AM #12
Adrian Willanger
206 909-7536 - Seattle, WA
Profit from my two decades of experience

Sara, when I have a question rather than spending hours, like I did with a buyer trying to explain the market dynamics of waiting to purchase, I should just search active rain instead for the answer or help. Thanks to you and your team for the chart!

Mar 17, 2011 10:47 PM #13
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