As real estate professionals, we sometimes get inquisitive looks, as we may be telling a friend that this is a great time to buy a home and another friend that they have to lower their price in order to sell their home. Wait a minute. How can it be a great time to buy if prices are falling? Are we just saying this to make a sale? Actually, the Realtors are correct on both counts. Perhaps for the first time in American real estate history, you must buy now and you must sell now. How can this be? Because what is important to the buyer is different than what is important to the seller. Let us explain.
The most important thing to the seller: PRICE
Every seller is most concerned with trying to get the best price possible for their home. In order to do that, they must sell now. Banks repossessed the highest number of foreclosed homes in history last month. These houses will come to market at dramatically discounted prices. This is the main reason analysts are calling for another dip in prices over the next eighteen months. The best advice a seller can receive is to sell their home now before these foreclosures come to market.
The most important thing to the buyer: COST
Price plays a part in the buyer’s decision. However, the most important thing to most buyers is the cost – the mortgage payment they must pay every month. That payment is determined by the price of the home AND THE INTEREST RATE ON THE MORTGAGE. Rates are artificial low because of government intervention. That will not last forever.
The National Association of Realtors (NAR) has projected that rates will rise over the next seven quarters. What will that do to the cost? Here are NAR’s projections and what impact it will have on a $100,000 mortgage:
For a million dollar mortgage, you can multiply that difference by 10. $82 becomes $820 a month or nearly $10,000 a years for 30 years: $300,000. As we can see, the interest rate has a major impact on the COST of the home. Even if prices continue to fall, the cost of the home may not go down if interest rates increase; the cost to own the home may even go up.
The Quantative Easing by the Federal Reserve has become a reality and mortgage rates have already ticked upwards this week, so right now is the best time to either buy or sell. Your real estate agent is trying to give the best advice they can to every family they work with – even if that advice seems to be counter intuitive. Call us at 914-500-9198 or email us to help you make the right choices.
With these record low interest rates, there are amazing opportunities to own wonderful homes in Scarsdale, New Rochelle, Larchmont, Edgemont, Pelham, White Plains, Harrison, Mamaroneck, Hartsdale or any other Westchester towns., all for less than a Manhattan 1 bedroom apartment.