The big question, when will we hit bottom or have we already? As Realtors we and others in the industry that we work with daily are frequently hearing buyers saying they are waiting for the bottom to buy; hence the point of this blog entry. Keep in mind statistics
and trends are found and compiled after events, not before them thus if you are waiting for confirmation on hitting bottom you’re pretty much guaranteed to miss it. Additionally think about this, in Portland we’re seeing -2% to -7% depreciation rates, so lets say on a $300,000 home if you’re “waiting for the bottom” then you’re betting that home would be $285,000 in one year at -5% *if* (and that’s a huge if) we continue to see a solid decline for the next year, so you’d save $15,000 right?
You need to look at the whole picture: Last year at this time interest rates were around 6.2%, now interest rates are at record lows at around 4.8% so that home at $300,000 is going to cost you about $1,575/month in payments to buy it now. Considering this time last year interest rates were around 6.2%, it’s entirely possible they would be there again next year (or higher, 7%? 8%?) and most lenders would agree it’s very unlikely they will still be at current levels or lower. So lets say you’re gamble panned out, you can buy the same home for $285,000 in 2010, but then interest rates have since gone back up to 6.2%. While you didn’t “lose” $15,000 in equity in the first year you are now losing $200/month in interest to your loan instead due to the difference in interest rates (and if you’re a first time home buyer, you also missed the $8,000 tax credit chewing up more than half of that avoided $15,000 loss). Considering 4.8% is unlikely to be seen again for decades, you won’t be re-financing out of that extra $200/month anytime soon either. This bet could end up costing you much more in the long run.
By all means if you want to make that gamble be my guest, but look at all the angles, be informed both in current events, rates & markets but also historical events, rates and markets as well. We know what the current conditions are and everything across the board is screaming “buyers market!”; do you really want to continue gambling and risk losing out on the market of a lifetime or buy at a rate and price that is likely to be the lowest possible in your lifetime?
~Scott McDonald – McDonald Group Realtors : Everything. Portland. Real Estate. You’re Portland Real Estate Resource
Tags: depreciation, hitting bottom, interest rates, portland housing market