Ted C. Jones said it in his blog post on April 2, 2009 and it still applies today:
Primary residence buyers, Florida vacation home buyers and real estate investors alike are on the fence about property purchasing, assuming that the market has not hit bottom and the prices will continue to go down. It is the prospect of further price erosion and the need for a "deal" that keeps many on the sidelines instead of entering home ownership, in spite of the fact that the interest rates are lowest since Freddie Mac started statisical analysis in 1971.
Mr Jones says "While further price declines may be realized, I believe the likelihood of rising interest rates makes purchasing now a better option than waiting for further potential value declines. Simply stated, there is a greater possibility of interest rate increases than potential value declines. Even with the price decline, the interest rate increase may result in the buyer no longer being able to qualify for a loan on a home they wish to purchase for which they qualify today. Despite facing a potential in declining home values, now may be a better time to buy."
A simple mathematic formula demonstrates the significant cost savings at today's low interest rates vs. the sharp reality that rates may go up in the very near future:
Assume a loan today of $100,000 with a 30 year fixed rate at 5%. At these terms a buyer would have a monthly P&I payment of $537. If the prices of the home decreases 5% (and the loan amount as well), but the interest rates go up 1% point then the buyer will be paying $570/mo.
it is important for buyers not assume that even if home prices do decline further that they are not necessarily going to get that the best deal.
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