On The Fence On Buying
Rate versus Price Reduction
Everyone wants to get the best deal when buying a home. However, for potential buyers who are waiting to see if home prices come down a little more, the wait could cost them. Let's look at an example to see why.
Say a homebuyer wants to buy a home that costs $600,000. But the buyer wants a better deal on the home, so she delays a transaction until the home is reduced by $20,000. If, in the meantime however, rates were to rise .75% to 4.75% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $85,000 more than paying the $600,000 purchase price and locking in the 4% interest rate. In other words, the buyer would save $10,000 only to end up paying $85,000 more.
Now these prices and rates are just for the sake of example as depending on the product, they can vary. But the point is that sometimes waiting for a home price to reduce may end up costing homebuyers much more than they expect if rates rise.
Before rates go up, they should strongly consider buying now.