Should I Wait for House Prices to Drop?

A question that many buyers have been asking is whether they should buy a house now, or wait until prices drop.

Guest blogger, George Kennedy, of Wells Fargo Home Mortgage, offers some thoughts in his post.

Should I wait for prices to drop?

The question should not be whether or not house prices will fall, but whether your purchasing power will fall. A slight increase in interest rates can cost you tens of thousands of dollars on the life of your loan.

Take a look at the following example. A $250,000 loan at today’s 30 year fixed interest rate of 4.75% will have a monthly payment of $1,304. If the interest rate should rise to 5.5%, the same $250,000 house will have a monthly payment of $1,419. That is an increase of $115 per month. Over the life of a 30 year loan that is nearly $42,000.

So, the real question to ask is this….Do I think it is more likely for that house to drop in price $42,000 or that interest rates will rise by .75%?

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Thank you, George! Contact me for more information on Baltimore house values, and what an increase in interest rate versus a lower price can mean for you.

This Month in Real Estate August 2010

This Month in Real Estate August 2010 has been released.

As I mentioned in my July 15 post, “Mortgage Rates at Lowest Point in Five Decades,” mortgage interest rates have dropped to their lowest level in the past 50 years. On July 29th, that number was 4.54%! Freddie Mac’s current average interest rate is at a historic low of 4.6% — right at the lowest since it began recording in 1971 (but up from Thursday!).

While it is tempting to wait for a price for a home to drop, what tends to happen is that when prices drop, interest rates rise. Therefore, your payment, even if the price of the house is lower, may be the same or higher than it would be right now!

Contact me more information on buying a Baltimore home using historically low interest rates!

Mortgage Rates at Lowest Point in Five Decades

Mortgage rates are at the lowest point they have been in five decades.

The national average is 4.57% for a 30 year fixed conventional loan.

MSNBC reports that:

Rates have fallen over the past two months. Investors, concerned with the European debt crisis, have poured money into the safety of Treasury bonds. Treasury yields have fallen and so have mortgage rates, which tend to track yields on long-term Treasurys.

Though the rates are very low, many people have already taken advantage of the low rates that have been in place for months now. These rates also don’t include add on fees, which Freddie Mac reports right now theirs are averaging about 0.7% of the loan amount.

Others are not refinancing due to the fact that they actually cannot. They have less equity in their home than is on their current mortgage, and do not have the money to make up the difference. So despite the possible lower payments, these distressed people cannot take advantage of the historically low rates.

Many Baltimore homeowners are in the same situation, putting them at risk for a short sale if they need to sell.

People who have been on the fence about buying a home should consider the moment to be now. With rates this low, plus Baltimore home prices being so low, there has rarely been a better time to buy!

If you are ready to buy a Baltimore home, contact me today to take advantage of these incredible low interest rates.