Buyers who choose to wait until prices come down more, are also gambling that interest rates will hold steady or drop. What is not widely understood is the impact interest rates can have on the real monthly cost of home ownership. Even a 10 percent drop in home prices is immediately nullified by a mere 1 percentage point increase in interest rates on a 30 year mortgage loan.
Also, once the market settles, or shows any sign of improvement, opportunities start slipping away. The very moment sellers no longer have to make concessions, many won’t. Since there is almost always group think at play with all of the waiting buyers, when the pent-up demand shows back up, buyers may be faced with mounting competition for the best homes available.
Source: REALTOR magazine, January, 2009
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