Home Buying Tip – Don’t Let The Economy Faze You
If you are in the process of looking to buy a new home, prepare yourself for some interest rate shocks. That will be one of the first effects you’ll feel if Congress fails to reach any sort of agreement on extending the national debt limit. While an increase in interest rates will hurt, and it will make obtaining a mortgage harder, it shouldn’t put you off buying. An increase of 1% in interest rates is massive and it will put interest rates above 5% – tough, but not as tough as it has been or could be in the future.
There are several other factors to take into account. Ten years ago, interest rates were up over 7% while home prices were a conservative 15%-20% higher than they are now. Even five years ago, we saw interest rates at 5%. Home prices are down 25%-50% compared to five years ago so if you do your math, you’ll find that even at 5% you’re in a better position than buyers 5-10 years ago. You will also see home prices take another dip leading to more underwater homes, foreclosures, and short sales.
For buyers, the news is better than it is for sellers. Where two weeks ago some sellers were beginning to feel a little better, increased interest rates will quickly wipe that feeling away. Selling a home is going to get harder and the pool of eligible buyers will no doubt shrink a little, although probably not as low as some pundits are predicting. Higher interest rates won’t affect cashed up investors, and with a rental economy set to explode you may even see an increase in overall sales.
The economy will impact on the housing market. interest rates will go up – they already have this week – home prices will fall again, although not as badly as the height of the economic crisis, and the rental market will take off once again. For home buyers, higher interest rates may sound bad, but a higher interest rate on a lower priced home is sometimes better than a lower interest rate on a higher priced home – especially if you can renegotiate that loan should interest rates drop again.
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August 2nd, 2011 at 12:51 am
It is given that market can become unstable so real estate investors, home buyers and sellers should be on guard on the changes. This means they have to be ready for the threats that might affect their transaction or their business. They should take every opportunity as a source of their strength or else they will be drowned at the changes especially if the market is volatile. Finding banks which could give them a loans with less interest rate may be easier said than done sometimes but it is not impossible. This is when networking would come in. In the same manner there are also some sort of refinancing. Maybe they could look into the opportunities here.