Joe Knows Mortgages

Everyone Wants a Lower Price, But What About the Impact of Interest Rates?

When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It’s important to keep in mind, however, that the sales price is not the only factor that determines what the monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.

Why Should I Rush to Buy?
While you may have heard discussions in the media about the decline of property values here for Brevard County Real Estate, the rate of decline appears to be stabilizing.

That being said, it would not be unreasonable for buyers to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Many markets are reporting that lower property values have been bringing out investors and the result has been multiple offers on many properties. Properties priced correctly are not declining and, in fact, are creating a lot of interest.

Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.  So the interest rates for a Brevard County Mortgage is still low.

But buyers shouldn’t be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!

Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to procrastinate. In just five days, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.

For anyone who was waiting for prices to drop even more, a 1.00% increase in interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.

If you or your clients are waiting for prices to fall even lower, be aware that while holding out for a lower price may help them win the battle, they could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.

Clock is Ticking on Free Money
If you are planning on purchasing your first home this year, you need to take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today’s market, this impacts many buyers.

If you have questions about this update, give us a call. I can show you how waiting for the lowest price could really cost you or your clients more in the long run.

This months Luxury Home Showcase will be in the Exclusive Cloisters Community.  This event is by invitation only.  If you would like to be on the invite list for next month’s event, please email Joe Harris.

 

Opportunity Everywhere!

 

After completing my market analysis for April, I continue to see that Brevard County remains one of the best values in coastal florida.  Between the rivers, and the beaches, where else can you enjoy such a high quality of life, and pay such a reasonable price for a house?

Check this out!  80% of the sales of single family residences in the month of April are under $200,000.  That means that home pricing has presented an opportunity for more people to achieve the dream of home ownership.

While the low priced sales get the majority of the attention, we are still experiencing many move up buyers, and first time buyers in the $200,000 to $500,000 range.  With 98 sales in this range, many are finding outrageous bargins that simply can not be passed.

                As you can see from the financing stats, cash is still king!  35% of buyers in April chose to pay cash for the property.   This is a good thing; this means that people are looking at the real estate in our market and saying that the prices are so low, it is worth risking their cash to purchase the property.  In years past, roughly 10% of purchases were done with cash.

One of the biggest misconceptions is that there is no financing and lending available right now.  I am here to tell you that is just not the case.  With the overwhelming majority of 64% of the transactions being financed, you may clearly see that money is available.  Not only that, the money is cheap!  Buyers have been getting historically low interest rates.

As a professional living and working in Brevard County, it is great to see home prices that are affordable to many.  It has been said many times over that in times of disparity there is opportunity.  Right now you can buy a house at a deep discount, at historically low interest rates, to give you one outstanding opportunity!  If you have the means to purchase a home, there is truly no better time than right now.