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A Great Time To Buy a Home

Why It's a Great Time To Buy a Home.

       The Perfect Rainbow
       The Incredible Effect of Low Interest Rates
       The Importance of Good 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!

And 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 rainbow’s always follow, sneaking up as the sun peeps through a clearing sky, showing even on that retreating drizzle.

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

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

The values are bouncing on the bottom – and not likely, it appears, to go lower.

The competition generally isn’t yet formidable.

Money is available, at all-time low rates, but rates are anxious, it appears, to rise.

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

Of course we would still recommend the usual intensive care, especially attention to resale and valuation.

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 mortgage pay $954.83 $954.83 $954.83 (same "available")

loan amount supported $200,000 $177,877    $159,257

as % of $200,000 100% 90% 80%

difference in loan amt.            base $22,123 $40,743 (less)

       At the 10 year mark:

10 yrs of payments $114,579 $114,579 $114,579 (same)

10 yr balance on loan $157.538 $144,688 $133,276

paid principal 10 yr $42,462 $33,189 $25, 981 More equity at 4%

paid interest 10 yrs $72,117 $81,390 $88,598 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 $200,000 $200,000 $200,000 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   1% $19,403

difference 2 %
$39,145

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 1% $35,430

difference 2%
$72,323

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 1%

$42,771

difference 2% $87,937

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.

	4%	5%	6%
	same mortgage pay	$954.83	$954.83	$954.83	(same "available")
	loan amount supported	$200,000	$177,877	$159,257
	as % of $200,000	100%	90%	80%
	difference in loan amt.	base	$22,123	$40,743	(less)

At the 10 year mark:
	10 yrs of payments	$114,579	$114,579	$114,579	(same)
	10 yr balance on loan	$157.538	$144,688	$133,276
	paid principal 10 yr	$42,462	$33,189	$25, 981	More equity at 4%
	paid interest 10 yrs	$72,117	$81,390	$88,598	Less interest at 4%

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A Great Time To Buy a Home