At least 3 or 4 times a day I am approached and asked if it is a good time to buy a home. I hear how bad the market is right now and how interest rates are going up. I'm quick to reply that, yes, rates are a little higher than what they were 1-2 years ago --- but the price of the homes are down - - some WAY down. Would it be better to pay a higher price on a home with a slightly smaller rate -- or less in price and a higher rate? Let's see:
We'll use the following as examples - $100,000 @ 6% & 6.25% and $95,000 @ 6.25%
Ex. 1 - - Home price of $100,000 and a rate of 6% for 30 years
payment would be $599.55/mo (principal and interest only - don't forget to add insurance and taxes)
total interest paid would be $115838.19 for a total loan amount of $215838.19
Ex.2 - - Home price of $95,000 and a rate of 6.25% for 30 years
payment would be $584.93/mo (principal and interest only - don't forget to add insurance and taxes)
total interest paid would be $115575.28 for a total loan amount of $210575.28
Ex.3 - - Home price of $100,000 and a rate of 6.25% for 30 years
payment would be $615.72/mo (principal and interest only - don't forget to add insurance and taxes)
total interest paid would be $121658.19 for a total loan amount of $221658.19
Examples 1 and 2 represent buying the same home with different prices and rates. Ex 1 has the higher house price and a lower rate and Ex 2 has a lower house price and an increased rate. Ex 3 shows both a higher price and rate.
SO, back to the original question - "Is it a good time to buy?" YES!! Historically, home prices appreciate over time. Just like the stock market - yes, it is lower than the first of year - - however, stocks make money 100% of the time over 10 years (heard this from a radio talkshow host yesterday - like I'd be that stock smart!). The only place I can see home prices go down due to depreciation would be the west coast - home prices were low until the dot com era - then home prices skyrocketed! Now, those prices are coming down to match the middle class income.
I welcome your comments and questions!! I've not posted many comments on here and would like to start doing this more often - with your replies and suggestions I would hope to increase the traffic to my site. Thanks for making this a success! Keith