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A Great Time To Buy a Home


I was seldom able to see an opportunity until it had ceased to be one. Mark T.

   The Perfect Rainbow?
   The Incredible Effect of Low Interest Rates
   The Importance of the Best Representation

(Please also see a new blog, right menu, "MARKET WATCH/Market Blog"....a reprint from an article just published in the Huffington Post by John R. Talbott, the only national figure to predict the housing collapse, now says "Buy a House, Now!".)

The Perfect Rainbow?

Of course, you’ll recall the popular movie of a couple of years ago…The Perfect Storm! It was an unlikely but memorable name…and The Perfect Rainbow is a lot easier to visualize!

We’re not saying the storm we’ve been through was “perfect”, but it was a formidable event, and to a degree, still is….like the drizzling that follows a local storm.

But rainbows always follow, sneaking up as the sun peeps through a clearing sky, showing even on that retreating drizzle.

From all aspects, the housing prospects for buyers could easily be called The Perfect Rainbow. We don’t recall circumstances any more promising, and we're betting it won’t happen again soon.

There’s great inventory from which to choose – (some even a bit hidden, held off the active market.)

Qualified observers believe "bumping on the bottom" of the value/pricing curves.

That appear to be true locally where we appear to have stabilized.

The competition generally isn’t yet formidable, (except surprisingly, we do find competiton on the best properties and best values).

Money is available, at all-time low rates, but rates are always "anxious" to rise. (The long term effect of interest rates is simply staggering....see the next section below).

The “affordability index” is at an all time high.

Of course we can't predict precise "bottoms" or when the upward trend will really become clear, but by that time, interest rates will be clearly racing alongside. We're simply saying that with careful attention to resale and the best help possible, there are compelling reasons to exercise contrarian thinking, right now.

The Incredible Effect of Low Interest Rates:

There are two examples given here of the awesome short-term and long-term effect of low interest rates, and a discussion about how this factor could very much affect the timing of entering the home buying market,

Example "A" shows how an increase of 1% and 2% in interest rates affects the price of the home you “can” buy. It assumes you can "afford" $ 954.83 per month in payments at different interest rates, which directly determines how much you can borrow….yet interest costs, at the higher rates, despite a lower purchase price, are still higher…the 10 year mark used to measure.

One could “look at it” in another way: if a buyer waited for a future lower value, and interest rates rose just 1%, he would have to have a $22,123 discount in today’s $200,000 home to make up for the higher interest rate. And he would be paying more long term interest.

If interest rates rose by 2 points to 6%, the discount would need to be $40,743.

Then as it relates to the decision-making process, the 4% interest rate is today’s fact…the future discount a possibility.

	4%	5%	6%
same pay	954.83	954.83	954.83	(same "maximum")
loan amount supported	200000	177877	159257
as % of $200,000	100%	90%	80%

difference in loan amt.	base	22123	40743	(less)
		11% less	21% less

At the 10 year mark:
10 yrs of payments	114579	114579	114579	(same)
10 yr balance on loan	157538	144688	133276
paid principal 10 yr	42462	33189	25981	More equity at 4%
paid interest 10 yrs	72117	81390	88598	Less interest at 4%

Example “B”: This shows the total difference (not discounted for time) for a loan of 30 years at the fixed rates shown, when repaid (home sold?) at 10 and 20 years, or kept until the loan is paid in full. The point: differences in interest rates makes a huge difference in the total loan repayment…(and it's skewed, most dramatic in the early years, obviously because more interest is paid in those years.)

Taking advantage of current interest rates is a goal in itself…a big factor in choosing when to re-enter the market….larger than commonly viewed without a workup like this.

Interest Rate:	4%	5%	6%
principal	200000	200000	200000	same
monthly pays	954.83	1073.64	1199.10	(for a 30 year amortization)

10 yr balance	157538	162684	167371	balance on the loan
total paid	114580	128837	143892	payments X 10 years
paid principal	42462	37316	32629	therefore, principal paid
total interest paid	72118	91521	111263	total payments less principal
difference		19403		1% interest difference
			39145	2% interest difference

20 yr balance	94309	101225	108007	balance on the loan
total paid	229159	257674	287784	payments X 20 years
paid principal	105691	98775	91993	therefore, principal paid
total interest paid	123468	158899	195791	total payments less principal
difference		35430		1% interest difference
			72323	2% interest difference

30 year balance	0	0	0	balance on the loan
total paid	343739	386510	431676	payments X 30 years
paid principal	200000	200000	200000	therefore, principal paid
total interest paid	143739	186510	231676	total payments less principal
difference		42771		1% interest difference
			87937	2% interest difference

The Importance of Good Representation:

It's always important....but even more critical in these days.

Of course, we consider that the concept of “Exclusive Buyer Representation” is far more likely to result in best possible selections, making the best possible decisions from options presented objectively. The consultant-style unbiased support, and attention to resale making critical differences.

This site is dedicated to defend that.

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A Great Time To Buy a Home