The Cost of Sitting on the Fence
by Robert T. Boyer, Ph.D. on Dec.17, 2010, under Economics, General, Interest Rates
It you have been listening to the national media talk about the continued decline in home prices and think it is safe to wait for the bottom a little longer, think again. There are two major components: price and payments.
For price, you need to forget the national media, and even the local news, and consider your specific neighborhood of interest and your price range. We have hit bottom in many areas of San Diego already. In fact, for homes priced under $430,000, it is an extremely hot market throughout most of San Diego. Supply and demand are reasonably balanced up to $900K and then prices get weak due primarily to the difficulty in getting a loan.
For payments (what it is actually going to cost you to live in the house), you need to pay close attention to interest rates. The table below shows the differences. A few short weeks ago, you could get a loan at 4.375% and pay $2,082 per month in principal and interest on a loan of $417,000. Today, the same loan will run about 5%. To make the same monthly payment, you can now only get a loan of $387,842. A decrease of 7%.
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San Diego home values are not going to drop faster than interest rates will go up. If you’ve been thinking about getting into your first home or especially if you want to buy up in a down market, now is the time to take action. Get pre-approved by your lender first so that you and your Realtor are only looking at homes you can afford.
[This report is sponsored by the Grandmaster Store for Karate Uniforms.]
Click for luxury homes in San Diego.
