Central Station

The Bay Area's Newest Destination

Wednesday, March 5, 2008

Ignore the Headlines?

That's what Time Magazine writer Dan Kadlec says in his recent article dated February 25th. There are really two markets to time, the housing market and the interest rate market, and there is looking to be a rare union of two great opportunities when you put them together. With rates at near historical lows (see the chart of how rates have trended over the past 30 years), we may be in a short-lived window to capture some of the best values available in decades.

As our mortgage lender so aptly put it earlier this week, a buyer isn't really paying the purchase price (say $400,000), they are paying a downpayment (say $12,000) and a monthly payment (say $1,900/month). So whether the purchase price is $395,000 or $405,000, that difference is far over-shadowed in a monthly payment by just a .5% change in interest rates. The chart below illustrates how a change in interest rates can have a significant impact on your monthly payment:
With rates near historical lows, a temporary federal government stimulus package being passed, and an election looming, Dan Kadlec of Time Magazine makes the following conclusion on someone waiting to time the market and facing a potential increase in rates: "If you waited a year to buy, you have saved nothing and spent a year living someplace you'd rather not be."



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