THE CASE AGAINST WAITING TO BUY
Let’s say you are ready to be a Sedona homeowner. You have good credit, plan to stay here for a while and have been waiting for the perfect time to enter the market. Well, believe it or not, NOW may actually be the time to get serious – before inflation and an inevitable rise in interest rates wipes out your current advantage.
By the end of February, the average national interest rate on a 30-year fixed rate mortgage was at 6.04 percent compared to 5.46 percent in mid-January. That is inflation with a capital I. In January the Consumer Price Index for all items rose at an annual rate of 4.8 percent, well above the average of 2.5 percent for all of 2007.
In other words, what is forcing home prices lower is the same thing that is pushing mortgage rates higher. Anything you gain by a further drop in home prices may very well be offset by a rise in the cost of financing your purchase.
Consider a typical Sedona home that today sells for $400,000. You put down 20% and get a 30-year fixed rate mortgage at today’s rate of 6.04 percent. Monthly principal and interest comes to $1,926.79. Let’s say twelve months from now the same house goes for 10% less, or $360,000. By that time the Fed has raised interest rates to 6.75 percent and your monthly payment would then be $1,867.96. You would save $58.83 a month during the twelve month span.
Meanwhile, home prices might have steadied and sellers would be feeling less pressure to negotiate. And you would have missed out living in Sedona for a year while saving yourself a grand total of $705.96 on a $360,000 purchase.
Is it really worth waiting? Risks always seem most acute when the headlines are giving you ulcers. But that is exactly when a person should be thinking long term. Policy makers are now predicting that for the rest of 2008, the risk is definitely on the upside. If you’re not convinced, I suggest you keep your eye on the price of 10-year Treasury bonds. That’s the basis for calculating which way interest rates are moving on a fixed rate loan.
If you are looking for an opportunity to move to Sedona, consider taking advantage of my thirteen years of experience and the fact that I am one of the top producers in this market. Allow me, Lee Congdon, to serve as your on-site eyes and ears as to what is happening in this most beautiful of all places in America.
Call 928-300-5050 or E-mail me at Lee@LeeCongdon.com
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