As we are nearing the end of 2006, we find housing inventory at record levels and interest rates holding steady just above 6%, down nearly 1/2 percent from its highs this summer. This has placed buyers in an excellent position to find the perfect home and cash in on what are still historically low interest rates.
Cheryl Stuntebeck, Edina Realty Mortgage, had this to say about the mortgage market:
“While interest rates are .75% higher than they were at their lows in 2005, the current 6.1875% rate on a 30 year fixed mortgage is still about 1% lower than the 10 year average. Many industry analysts speculate that rates will slowly climb higher in 2007, making it prudent to lock in a purchase now.”
She also posed the following comparison:
“If a buyer purchases an average-priced home today, $285,000, with 20% down payment their total monthly payment would be around $1700. If that same buyer buys the same home when rates are .5% higher, their monthly payment would be around $1800, an increase of $100 per month. To put it another way, if rates were to climb .5% that buyer would have approximately $16,000 less buying power at the same monthly payment.”
Earlier this year many sellers were not willing to accept that the marketplace dynamics had changed and that it had become a buyer’s market. Fast forward a few months and many of those sellers still have their homes for sale today. Most of them have had to reduce their price one, two or even three times.
Today most sellers understand that we’re in a buyer’s market and are pricing their homes more appropriately; understanding that they need to be willing to make some concessions to the buyer to get their home sold. This can be simply taking an offer under asking price or paying the buyer’s closing costs, or can get more creative with the seller paying down the interest rate on their mortgage, prepaying townhome/condo association dues, escrowing money for new carpet, etc.
So Buyers: by taking advantage of the market today, you can save both on the purchase price and the interest rate while also taking advantage of the largest selection of homes ever available.