Buyers - Would You Prefer an $80,000 Incentive or $8,000 ?

Real Estate Agent with The Somers Team at KW Philadelphia

Buyers - Would You Prefer an $80,000 Incentive or $8,000 ?

In Philadelphia, the spring market has not been too "springy".  This spring certainly has not been like spring 2010, "the end of the world" craze where the inventory was non-existent and there was an insane rush for buyers to meet the Buyers - Would you prefer an $80,000 Incentive or $8,000 ?deadline to qualify for the First Time Homebuyer Tax Credit to receive the $8,000 incentive.  That incentive propelled the market last year:  it was a boon for sellers locally and provided necessary support to keep the housing market afloat nationally.

So what about today ?   The housing market in Philadelphia continues to hold up well, although the inventory has crept up and prices are soft.  The great news for buyers is that interest rates year over year are down well over a point (at historical lows).  Rates last year were about 6 percent whereas now they are about 4.5 percent !  What does that mean ?  To me, this is the best incentive ever for a smart buyer.

When you compare year over year, a buyer can save $80,000 over 30 years.  For example, on a $250,000 loan, the interest portion at 6 percent on a 30 year mortgage would be approximately $289,600, and at 4.5 percent it would be approximately $206,000, a savings of interest of $83,600 in one year.  If your loan amount is higher, the savings of course would be even more.   The other benefit that this does is that allows a buyer to get a better property since the purchasing power is at the highest with rates being the lowest.  With the inventory being at its peak level right now, a buyer can be quite selective when purchasing a property and be like a kid in a candy store.

I have heard some pundits on TV recommend to bring back the tax credit.  Although I know that will certainly make the market more springy, my point is there is incentive enough in the market right now without having to burden the taxpayers.

We are taking buyers out every weekend taking advantage of the above scenario.  These folks will be well positioned in the years to come !

If you are on the fence now, why not take advantage of $80,000 incentive ? 

Pretty much a no-brainer for potential homeowners if aligns with your other goals.

With interest rates so low, the time is NOW.  What are your thoughts ?


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Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Christopher and Stephanie, this is a very good way of looking at the savings over a period of time. There is also an immediate monthly savings on the payment when they purchase now at the lower rate.

Jun 26, 2011 02:38 AM #7
Howard and Susan Meyers
The Hudson Company Winnetka and North Shore - Winnetka, IL

Christopher and Stephanie..How true!  This is the perspective that real estate guru Steve Harney has been pushing for some time...Viewing "cost" vs. "price".  "Price" is your out of pocket expense.

Jun 26, 2011 03:11 AM #8
Kevin Kueneke
Caliber Home Loans - Encinitas, CA
San Diego Mortgage Banker

Great point, I have been using this same "fun with numbers" example.  Even a 0.25% difference in rate adds up over time.

Jun 26, 2011 03:20 AM #9
Harry F. D'Elia
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

It is vital to know they numbers when it comes to real estate. Great example

Jun 26, 2011 03:22 AM #10
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Our market has not hit bottome yet either and I suspect it will be at least another year before it does. Homes are still selling though!

Jun 26, 2011 04:22 AM #11
Adam R. Cohn
We actually get mortgages closed FAST!

Great blog!  With rates this low and prices down this much its the perfect time to get into the market.

Have a great day!

Adam R. Cohn

Jun 26, 2011 05:07 AM #12
Jeff and Lee Ann Mix
Orange Realty Group - Las Vegas, NV
Las Vegas Homes and Short Sale Agents

That is why you can never perfectly time the market. I have buyers say what if the market drops 10%, I say what if the interest rates go up a point. If a homebuyer is looking to stay in a home for 5 years there isn't much of a difference.

our median price for Las Vegas Homes is about 110,000. I'll use your 4.5% rate:

110k loan @ 4.5% is a monthly payment of $671 and total interest of 85,147.38

Now the buyer waits a year for the "10% drop" New purchase price is 99,000.

99k loan @ 5.5% is a monthly payment of $676 and total interest of 99,936.25

Buying a house is a lot of what if's but living in "your own home" is so much more.

Please check the cool calculator I have on my site for figuring out how long a homeowner will be upside down on their home.

Jun 26, 2011 05:14 AM #13
Patricia Aulson
Realtor - Portsmouth NH Homes-Hampton NH Homes

Hey thanks for the good post today.  I enjoyed the read.  There are those who just play things out, unfortunately.  You have to decide if it's worth hanging in there with them ...... or not!


Patricia Aulson/ Seacoast NH & ME

Jun 26, 2011 08:12 AM #14
Irina Riley
American Dream Colorado - Woodland Park, CO

Very good point. Plus, with these prices and rates, buyers can qualify for more.   

Jun 26, 2011 09:52 AM #15
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.
The low prices aare enough incentive along with low int. rates. I have 7 people who need help that bought a home with the 8,000 credit who are now losing their homes. Homes they could not affoard without the credit.
Jun 26, 2011 09:52 AM #16
Sherri Berry
Reliant Realty, Murfreesboro - Murfreesboro, TN
Murfreesboro TN Homes & Real Estate

Thanks for the great post!  I keep telling people that now is the best time to buy and your analogy was spot on!

Jun 26, 2011 10:08 AM #17
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

This is such a valid point, and I think it's important to point out as I don't believe enough buyers understand this.

Jun 26, 2011 10:14 AM #18
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Chris and Stephaine only ready,willing and able buyers can understand your point.  The ones who keep listening to Poison aka "Media" (Only call the Media Poison whenever they talk bad about the Real Estate Market)are the ones who are going to miss out on this great opportunity to become homeowners. Great blog.

Jun 26, 2011 01:19 PM #19
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Hi Christopher & Stephanie: Great article. This is an excellent way to look at the advantages of buying now! I like the way Jeff & Lee (comment #13) Ann took it to another level as well. Hopefully it will be enough to get through to some of the holdouts!

Jun 26, 2011 02:03 PM #20
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I was just making this very point yesterday.  Now, I can simply point to your post to illustrate the point!  Thanks,

Jun 26, 2011 03:24 PM #21
Rosalie Evans
Meritus Group Real Estate - Sioux Falls, SD
The Evans Group, Sioux Falls, SD Homes For Sale

I keep explaining this to people ad naseaum and I still have fence sitters. Thanks for backing me up!

Jun 26, 2011 05:04 PM #22
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Loreena - The incentives are huge indeed, probably the best time ever with rates where there are today.

Richie- That is the key, to have meaningful dialog, so folks understand.

Mel - Agreed.  Even if it is 10 years, at these rates the incentives are still amazing.  The other side is the purchasing power and the lower mortgage payment with the lower interest rates.

Barbara Jo - Exactly !  Always works that way !

Michael - Yes, that immediate savings is another huge benefit as well.


Jun 26, 2011 11:23 PM #23
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Great points!  Something that is becoming more and more obvious.  I think many prospective buyers are starting to understand this, but they are still afraid.

Jun 27, 2011 12:43 AM #24
Gary Burleson
Beach Water Realty - - Myrtle Beach, SC
Myrtle Beach Homes, Condos, Foreclosures, Investment Propery

Great tip and a good time to use your example. It surprises buyers, and sellers, when you show them the real cost of "waiting" for _______________. You just have to show them in terms they can understand.

Jun 27, 2011 04:08 AM #25
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

I agree, it is a matter of pointing out the advantages.  You have done a very good job of putting it in a way buyers will understand.

Jun 27, 2011 11:09 AM #26
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