Did you know that a 1 percent rise in interest rates can wipe out a 10 percent savings in the market price of a new home?  Yes it is absolutely true!  "So what", you might say..."why is that important?" Some people (and probably most real estate agents) get so completely fixed on the market price of the home that they tend to forget the impact that interest rates have on the loan.  Yes, I know that most people are naturally concerned about the interest rate that they will pay on a home mortgage since the secured rate does have a direct impact on the monthly mortgage payment.  However, the problem is that there are many potential home buyers sitting on the fence right now waiting for the market to change (are you one of them?) out of fear that they might make a mistake if they buy too soon (see my previous blog on timing the market).  What I'm saying is...while you wait for prices to go down in a buyer's market, interest rates are generally going...up!  Yes, there are exceptions to any rule but I don't know anyone that has ever been able to time or predict when or in what direction rates will actually go such that they used the knowledge to their benefit.  People sometimes say that they want to wait for the housing market to improve before they buy, but lets be honest for moment!  As a home buyer or seller, when did you ever successfully time the market before...and save money or make money on the transaction as a result?  If you did, you were in all probability just plain lucky and they would love for you to come to Vegas and try another hand again.  Ok, let me ask the same question another way.  As a home buyer or seller, when did you ever "intelligently" time the market before...and save money or make money on the transaction as a result?  Ok...confess...I got you on that one didn't I?  Waiting out or timing the market, means that you're taking a gamble and you're probably not going to be successful in reaping a big profit or getting a steal of a bargain.  Determining the direction and momentum of the housing market is difficult for almost anyone (that goes for real estate agents and real estate consultants too) because there are various and several kinds of market and economic forces constantly at play.  Most likely, you're not going to know about the current changes in the market unless you hear about it in the news or when your barber enlightens you as you sit there in his chair on all the talk that he's heard.  By this time you hear the latest scoop from him its too late!  The word is by that time out and all of the low hanging fruit has been picked. Instead, why not buy a home when you're ready and able to enjoy it?  Time and enjoyment are of great value and importance too!  Wouldn't you rather enjoy it today at a more affordable price than buy the same home a year or two from now when prices and interest rates are both likely to be higher?  Think about it and come and see me! 

To illustrate our initial claim:

A home priced at $128,700 at a 5.87 percent rate over 30 years with 0 down payment will have a monthly payment of $760.90 (does not include taxes and insurance) and the total interest paid on the loan will be $145,225.03

The same home priced at $115,830.00 (10% less than $128,700) at a 6.87 percent rate over 30 years with 0 down payment will have a monthly payment of $760.53 (does not include taxes and insurance) and the total interest paid on the loan will be $157,963.93

Therefore; A difference of $12,738.90 in interest ($157,963.93 -$145,225.03) paid  over 30 years offsets a savings of $12,870 in price.

Conclusion: Don't wait for home prices to fall when interest rates are subject to rise.  Again, it only takes a 1 percent rise in rates to offset a 10 percent decrease (savings) in market price.  Just go and buy a home and don't worry about the market but let us show you how to do it right!

We sell homes in Fort Worth, Tarrant County and in the Eagle Mountain Lake, and Lake Worth areas.  Let me, Terri or one of our great buyer's agents show you around the place.  Please contact us...we would love to meet you and find your dream home.

Bernie