What is the Cost of Waiting!

What is the Cost of Waiting!

After interest rates hit their BOTTOM around October of 2010, you would think that potential buyers would get off the fence and finalize their home purchase BEFORE it became TOO EXPENSIVE to buy a home.  We are seeing some increased buyer activity as the warm weather approaches in Arkansas, but do buyer’s ever really think about what it cost them by waiting?  Probably not.  There is a cost of money!  This cost refers to the actual cost of financing at a specific interest rate.

Did you know that a 1% increase in interest rate equals a 10% REDUCTION in your buying power, which is your sales price?  Wow that was an eye opener, wasn’t it.  Since October 2010, interest rates have jumped as much as 1.5% in the last 5 months.  What did it cost you by waiting?  If were able to purchase a $200,000 home back in October (because of the low 3.5% interest rate), now you could only purchase a $180,000 home.  For the central Arkansas area, that $20,000 difference is a big difference in the style, age and size of the home you can now afford.

At 4.125%, you could qualify for a $206,313 loan amount.

At 5.125%, you can now only qualify for a $183,654 loan amount.

Yep, that just happened in YOUR market over the past 5 months.  You lost that much house by not capitalizing on the lowest interest rates in history.  Analyst say that interest rates can only continue to go up, and could possibly be at 6% by the end of 2011.  What will that look like?

At 6.125%, you will only qualify for $164,581 loan amount.  OUCH!  That one stung didn’t it?!  Within a year’s time, your COST OF WAITING could be $40,000!!!!  Now is the time to purchase if it is your desire.  Inventory and selection is high, prices are stable with good deals out there, there are a larger number of distressed properties which means great values, and interest rates are low (for now around 4.875%).

Don’t let the cost of waiting keep you from the advantages, tax benefits, savings, equity-building, etc of home ownership.  Buying a home is the largest financial decision of your lifetime.  As with any smart investment, it is better to buy low and sell high.  We are in a buying low market.  Take advantage of it while it is here.

Posted via email from Scott Deaton's Blog