Delays Can Hurt Buyers!

by Jim Stakem 6/10/2009

loudoun county, ashburn, leesburg, potomac falls, sterling, purcellville, south riding, lovettsville, hamilton, middleburg, chantilly, reston

If you are interested in buying a home this is a good time to buy but there are serious considerations along the way. We currently have depressed prices and record low interest rates and there has to be someone somewhere who actually buys a home at the absolute bottom of both but most of us aren't that lucky. We may be past the absolute bottom, interest rates have risen sharply in the past few weeks and could go higher. Check the chart below to see the effect of rising interest rates.

Sale Price $600,000
Down Payment $120,000
Loan amount $480,000

Interest rate Monthly Principal & Interest
4.75% $2,503.90
5% $2,576.74
5.5% $2,725.39
6% $2,871.84

The difference between 4.75% & 6% is $367.94! This may not seem like much on a monthly payment but the reality is that the 6% payment has eroded your buying power by $60,000! That's huge! If you were negotiating on a home and lost it because of a relatively small amount of money you probably made a big mistake and possibly cannot afford to buy it at 6%! Our interest rates are not that high but they are well above 5% and some experts are predicting further increases. If we do see price increases as well, home affordability will be dramatically affected and some people who want to buy will no longer be able to.

Should you buy now? If you need to buy, I believe that the conditions in our “Local Market” will not improve for buyers and more important the downside risk is very small. There may be some further decline in prices until we clear up the majority of the distressed properties and then we will begin to see prices increase.