The sale price of a home is not the only driving force in your decision to purchase a home. Interest rates and closing costs are a big part of the process. Here are two scenarios which illustrate my point.
Example #1 :
- Buyer A is looking at Portland homes priced at $312,500. He wants the absolute lowest price on real estate so he waits until he thinks the prices are at the absolute bottom. Let's say next summer prices are down 10% from where they are today and he buys for $281,250. He just saved $31,250. But the mortgage rates go up to 6% on 30-year fixed loans. He puts down 20%, borrows $225,000 and his monthly payment (not including MIP, taxes or insurance) is $1349.
- Buyer B is also looking at Portland homes priced at $312,500. She finds a home she really likes and wants to purchase today. She puts down 20% and obtains a loan for $250,000 at 4.25%. Her monthly payment is only $1229, and she was able to move into her new home now. She was able to save over $43,000 over the life of the 30-year loan. That more than makes up for the price drop but, most importantly, she was living in her new home for a year, while enjoying the tax advantages and building equity.