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Home Prices vs. Interest Rates…Should You Buy Now?

Are home prices still falling? Each and every day I get e-mails and hear the local media voice “opinions”. Everything from “Phoenix homes prices will fall another 10%”…to “Metro Phoenix Home prices on the rise”. The truth is I do not think anyone can tell with too much accuracy what is happening for sure. I tend to think it IS probable we may see a decline…particularly the higher end homes…$1,000,000 and up. Contrarily, it is my belief that the lower end homes may be right near the bottom. But that again is all just speculation. What we do know, however, is that recently interest rates have begun to creep up.

So…what if you are on the fence thinking about buying a home. Let’s look at some numbers.

Sales Price: $300,000

20% Down payment: $60,000

Loan Amount: $240,000

If this home were purchased with interest rates posted on Wells Fargo’s web site today, which is 4.875% for a 30 year fixed rate loan, that would translate to a PI (principal and interest) of  $1375.94. Of course the true final payment will include taxes, insurance and HOA fees…if any. ..but for comparison sake we will only consider PI.

Now…let’s say the value of this home drops by $10,000. This would make the sales price $290,000 and the loan amount $232,000 of our subject home…with 20% down payment. BUT…what if interest rates go up just 1% to 5.875%? That would equal a PI of $1372.37. Not a real big difference…but enough to consider the risks of fence-sitting? Maybe not. BUT…what if they went up ANOTHER 1%. Then the PI would by 1,524.07. Now we are talking a real payment difference.

As you can see from this chart (you may have to click on it to enlarge it)…when you hear “interest rates are at historical lows”…they are not kidding! THEY WILL GO UP! How fast and when remains to be seen.

Not only would the payment be more…but what a potential buyer could AFFORD to buy…or what they can QUALIFY for changes as well. They might not even be able to consider buying the $290,000 home at this point. For the same payment of around $1370…the sales price of the home would be more like $260,000.

So…take the leap! Lots of choices…good prices and still low rates. NOW is the time!  🙂

As always… if you are looking for a GREAT agent to help with your real estate needs please e-mail me at or give me a call (or text) at 602-504-3898 or 888-897-7821 x 114. Plus, I have a GREAT search tool on my web site that gives you the ability to search the entire MLS…just like agents do. Very COOL! ;) Go to Metro Phoenix Homes and check it out! YOU can create and save as many searches as you would like…and it it THE SAME SEARCH I DO AS AN AGENT! You will LOVE it!


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