Yesterday’s blog was about the increase in the average sales price in my home market of Jersey Shore A (small town, western Lycoming County, North Central PA, nowhere near the “shore”) from $107,000 in 2010 to $129,875 (let’s just call it $130,000) in 2011. That’s a 21% increase. Part of it is due to the Marcellus Shale industry, which is heavily impacting our market. Part of it (a small part) is normal appreciation. Despite the talking heads on TV, not all markets are overrun with foreclosures and short sales.
Even in markets not as robust as ours, buying power is in real danger of being eroded away—by rising interest rates. Interest rates have been historically low, and very low, for longer than any other time in my career (which is over 30 years). Here’s the math: borrowing $130,000 at 4.5% for 30 years requires a payment of $658.69—very affordable, and less than most rents in our area, again due to the gas industry. However, inflation is rearing its ugly head; the last time we had a lot of inflation, interest rates soared to 18% to 20%. They don’t even have to go up that dramatically to erode buying power. If rates rise only 2%, to $821.69 becomes the payment on that same $130,000 loan for 30 years. The rate has gone up 2%; the payment has gone up 25%.
In our market, if you are credit worthy and can buy now, you should do so. Rates will eventually go up; prices already are going up. For more information on market conditions, visit our website: www.MJacksonRe.com
Comments(1)