When is the best time to buy real estate?
When is the best time to buy? Spring invigorates the real estate market, meaning there are more homes to choose from. Because spring is historically the time of the year when inventories are highest, competition is at its peak as well. Contrarian shoppers may find negotiating more to their liking in the fall and winter.
According to Wells Fargo’s Dan Klebesadel “Mid-way through last year, when the credit crunch first came home to roost and the jumbo investors fled the market, our jumbo loans, e.g., a 30 year fixed, quickly ran up to nearly 7.25% with no points.
As of late, we have seen that same loan come back to 6.5%, which is a great improvement. The conforming loans have seen the same improvement as well. Once in the 6.375 - 6.625% range, we are writing 30 year fixed rates at 5.625% with no points which is only 0.50% above the all-time best I saw in my career back in early '04.”
So let’s analyze this:
$600,000 purchase price
20% down
$480,000 loan
7.25% (30 year fixed rate)
Payment $3274
Let’s assume the market has decreased 10% in the last 10 months
Now with the 10% decrease and today’s rate
$540,000 purchase price
20% down
$432,000 loan
6.375%
Payment $2695
Now let’s look at this from another angle, let’s say instead of a rate decrease we had a rate increase:
$432,000 loan
8.375
Payment $3283
The point being that when interest rates increase and they always do (just as real estate values are cyclical interest rates also rise and fall); monthly payments may remain the same even if property depreciates another 10%.
If I were looking to buy a home I would want to do so before interest rates go up - when will they increase? That's the million dollar question, but it appears that first we may have another rate decrease in store which could translate into an excellent time to buy! 
Categories: All about Money, Interest Rates, A Buyer's Perspective
Trackbacks
-
2/21/2008 12:02 PM
Los Angeles Real Estate Blog wrote:
Contrarians go against the flow. I had numerous clients buy income property during the last downturn and also assisted first time buyers gain entry into the housing market. Needless to say they have all made money (paper profits). When is the best time to buy real estate? When will we hit bottom? Have we hit bottom? Who knows? But if interest rates take another downturn, you should seriously consider purchasing your first home. -
2/22/2008 7:10 PM
Los Angeles Real Estate Blog wrote:
Contrarians go against the flow. I had numerous clients buy income property during the last downturn and also assisted first time buyers gain entry into the housing market. Needless to say they have all made money (paper profits). When is the best time to buy real estate? When will we hit bottom? Have we hit bottom? Who knows? But if interest rates take another downturn, you should seriously consider purchasing your first home. And this from Glenda - thank you Glenda! ……..How do you tune out all the chatter and ink on recession, housing, subprime woes, ... -
5/21/2008 2:55 PM
Los Angeles Real Estate Blog wrote:
I am “assuming” that since FNMA is nationwide, the 15 -19% (predicted) additional price drop is not necessarily applicable of our Los Angeles Housing Market. In our market, I have noticed that buyer activity has increased. Home inspectors, title and escrow companies are also busy (I know, because I ask them - business has picked up). It appears that prices have reached a level that are attractive to home buyers and they are again buying. WASHINGTON (AP) - Fannie Mae's CEO told shareholders Tuesday that the housing market is "about halfway through" its crisis and home prices ... -
7/24/2008 7:51 AM
Los Angeles Real Estate Blog wrote:
With interest rates still at historic lows, home buyers have the opportunity to purchase a home at today’s low interest rates. Why would you want to purchase a home if you think prices may decrease further? For approximately every 1% increase in mortgage interest rate, you will need a 10% drop in property values to afford the same monthly payment. The question becomes: "How much more do you realistically believe prices might drop? AND how much do you think interest rates will increase, after the Presidential election, perhaps by next Spring? Did you read the above? ... -
7/24/2008 7:52 AM
Los Angeles Real Estate Blog wrote:
With interest rates still at historic lows, home buyers have the opportunity to purchase a home at today’s low interest rates. Why would you want to purchase a home if you think prices may decrease further? For approximately every 1% increase in mortgage interest rate, you will need a 10% drop in property values to afford the same monthly payment. The question becomes: "How much more do you realistically believe prices might drop? AND how much do you think interest rates will increase, after the Presidential election, perhaps by next Spring? Did you read the above? ... -
7/24/2008 7:54 AM
Los Angeles Real Estate Blog wrote:
With interest rates still at historic lows, home buyers have the opportunity to purchase a home at today’s low interest rates. Why would you want to purchase a home if you think prices may decrease further? For approximately every 1% increase in mortgage interest rate, you will need a 10% drop in property values to afford the same monthly payment. The question becomes: "How much more do you realistically believe prices might drop? AND how much do you think interest rates will increase, after the Presidential election, perhaps by next Spring? Did you read the above? ... -
9/26/2008 9:12 AM
Los Angeles Real Estate Blog wrote:
As a Los Angeles Realtor, my real estate web site produces inquiries from all over the country. This is my most recent inquiry: I am a Broker in Tucson AZ. One of my clients lives in La Canada and is pre-approved for $300,000 and looking for a foreclosure in your surrounding areas. I talked with her yesterday and she talked to a few Realtors in the area and looked at homes but is very unhappy with their service. I would like to see if you can be of some assistance Please reply back to this ... -
9/26/2008 9:13 AM
Los Angeles Real Estate Blog wrote:
As a Los Angeles Realtor, my real estate web site produces inquiries from all over the country. This is my most recent inquiry: I am a Broker in Tucson AZ. One of my clients lives in La Canada and is pre-approved for $300,000 and looking for a foreclosure in your surrounding areas. I talked with her yesterday and she talked to a few Realtors in the area and looked at homes but is very unhappy with their service. I would like to see if you can be of some assistance Please reply back to this ... -
9/27/2008 7:06 AM
Los Angeles Real Estate Blog wrote:
As a Los Angeles Realtor, my real estate web site produces inquiries from all over the country. This is my most recent inquiry: I am a Broker in Tucson AZ. One of my clients lives in La Canada and is pre-approved for $300,000 and looking for a foreclosure in your surrounding areas. I talked with her yesterday and she talked to a few Realtors in the area and looked at homes but is very unhappy with their service. I would like to see if you can be of some assistance Please reply back to this ... -
1/17/2009 8:00 AM
Los Angeles Real Estate Blog wrote:
If you have been contemplating a move up – one to a more expensive neighborhood or a larger home, now might be the just the right time. Let’s look at why: The $450,000 home which Happy Harry purchased in the late 90's was valued at 750,000 in 2004; In 2009, it's worth 25% less - $562,000. Happy is extremely unhappy with his (recent) $188,000 loss. But wait….The larger home he was ogling in 2004 was $1,200,000. It too has declined in value... worth about 25% less and now selling for about $900,000. A ...
Comments