Waiting for the bottom of the housing market to hit just might be costing you money! Right now there are several factors that make this a great time to buy a new home:
1) interest rates at historic lows
2) lots of great seller incentives
3) significantly reduced home prices
4) large inventory of available homes to choose from
Historically, the housing industry is one of the first to be hit by economic troubles. Likewise, it is one of the first to start recovering. While the economy’s climb back to health will be much slower than its descent, one of the first things that will happen is that the Fed will begin raising interest rates to stem inflation. Miscalculating “the bottom” means you could miss out on one or more of the advantages offered in TODAY’s market. Example:
A house costs $218,900 today.
You put 20% down and get a 30-year fixed-rate mortgage.
The current interest rate is 5%.
Your monthly payment would be $940.08 P&I.
Say you wait 12 months for the price of that house to drop 10% to $197,010.
Now the economy is improving and the Fed has raised interest rates to 6%.
Your monthly payment would be $944.94 P&I
You haven’t saved any money “waiting for the bottom” and now you’ve paid rent for a year instead of earning equity. And what if during those 12 months inventories are whittled down? If that happens, “supply and demand” kicks in where sellers stop offering incentives and start raising prices. How much money have you saved (or lost) then?
Predicting the exact “bottom” is next to impossible. In fact, we usually don’t even know the bottom has been reached until the market is already on the rise again since reports and studies are typically 30-90 days after the fact. If the market has already hit bottom, do you really want to risk missing it for the limited (if any) savings you might get by waiting? Timing is everything. Saving thousands of dollars has everything to do with your timing.
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