If prices are falling, why shouldn't I wait?
It today's market, prices are right, rates are low, and there are plenty of homes from which to choose. But no one knows when that will change. So if you're waiting it out hoping prices will fall even lower, consider that you might be disappointed when the market picks up again (and it always does) and you're still on the fence watching opportunity pass you by. And even if prices do fall lower, there's no guarantee that mortgage interest rates will be at the same level they are today.
- In today's market with increased inventory, sellers are pricing their homes to compete. When the economy improves and more consumers begin looking for homes, prices will rise again.
There is a lot of "pent-up demand" in the market today. Millions of jobs have been created nationwide, yet the number of new households created is much lower. People who really want to make a move are waiting until they feel conditions are more favorable.
Waiting for housing prices to hit bottom is never a sound strategy. No one can predict precisely when prices will bottom out. In fact, the bottom is not usually evident until prices have started to move up again.
- While waiting for housing prices to fall even further, many consumers forget the role that mortgage interest rates play in determining what they end up paying for their home. So while prices might fall further, interest rates could rise and negate any savings from a lower purchase price. If you purchase a home for $150,000 at today's rate of 6.4%, your monthly payment will be $1,043 (not including property taxes or insurance). Assuming you wait and the price on that home drops to $145,000 but interest rates have gone up to 7%, your monthly payment would be $23 more each month despite the lower purchase price. Instead of saving money you end up paying $8,280 more over the life of the mortgage. Currently, mortgage rates are near historic lows, but there's no guarantee how long they'll be there. Celia Chen of Moody's Economy.com predicts rates will hit 7 percent in mid-2009.