Should we wait for home prices to drop further??Posted by Wayne Long on Saturday, August 14th, 2010 at 9:32am.
Mortgage rates vs Home prices
It is reasonable to want to buy at the very lowest point in the market. The problem is that no one knows where that bottom is..... Most seasoned investors will tell you that the bottome occurs and starts up before you reallize it. With this in mind I wrote a blog post on the Homegain blog and want to also post it here. Please add any comments you may have.Freddie Mac says that we have the lowest mortgage rates EVER!! Well maybe not ever but since they started tracking the rates. So maybe in the last 50 years or so…..Additionally, home prices have dropped to some of the best prices in a long, long time. So now the question is: Do we wait to see how low home prices may go before we buy?Here is some food for thought……
- Many people believe that home prices have found the bottom and are making a turn upward.
- Mortgage rates are at the lowest rate in 40 or 50 years. It is hard to believe they will drop any further and are more likely to move upward.
- We should look at the math.
What if home prices did drop another 10%? It’s very unlikely, but what if they did? Well, if mortgage rates stayed the same, that would be great! But, what if mortgage rates moved back up to a more normal 6.5% during the same time that the prices are dropping?$200,000 X 4.5% = $1013/month$180,000 X 6.5% = $1137/monthWhoa! You mean the price of a home could go down 10% on a $200,000 home but my payment could go up more than 10%. That can’t be right … can it?
Check out the blog on the right sidebar and let me know your thoughts on this!! Thanks