Comments on: A Buyer’s Dilemma – Waiting For Prices To Drop vs. Interest Rate Hikes http://www.thetimwoodgroup.com/2009/11/22/a-buyers-dilemma-waiting-for-prices-to-drop-vs-interest-rate-hikes/ Professional, knowledgeable real estate group serving the Big Bear, CA area. Tue, 22 Nov 2011 10:09:47 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Tyler Wood http://www.thetimwoodgroup.com/2009/11/22/a-buyers-dilemma-waiting-for-prices-to-drop-vs-interest-rate-hikes/#comment-991 Tyler Wood Sat, 09 Jan 2010 22:11:45 +0000 http://www.thetimwoodgroup.com/?p=3706#comment-991 Dee, those are great points and insight. I appreciate you sharing that. Makes it a whole lot easier to understand for myself and others I'm sure. Dee, those are great points and insight. I appreciate you sharing that. Makes it a whole lot easier to understand for myself and others I’m sure.

]]> By: Dee http://www.thetimwoodgroup.com/2009/11/22/a-buyers-dilemma-waiting-for-prices-to-drop-vs-interest-rate-hikes/#comment-990 Dee Sat, 09 Jan 2010 22:06:12 +0000 http://www.thetimwoodgroup.com/?p=3706#comment-990 I did figure out a single case for a friend of mine who had this question. Here's his example: Financing $300,000 for 30 yrs at 5.5% now, or financing the same house, where the price has theoretically dropped to $260,000, at 6.5%. In the first case the total amount of interest paid is $313,212.12, with a monthly payment of $1703.37. In the second it's $331,615.67, monthly is $1643.38. I told my friend that for these numbers, I'd consider this pretty much a wash in terms of overall interest & that he wasn't going to save a huge amount by jumping on the lower interest rate: In this case, he can bide his time a little. Financing $260,000 at 7.5%, though, things are starting to get skootchy: Overall interest is now $394,464.78 & monthly payment $1817.96. In that case, the price drop would not be worth the savings he could get by going with the lower interest rate, IMHO. I did tell him, though, that one advantage to waiting for prices to drop, even if the interest rates are a little higher, would be that something previously out of his price range might fall into it & possibly he'd get more house that way. He'd just have to keep an eye on the interest rates. Finally, I told him that if he is looking at his perfectamundo, all-time dream house today, he should not let the numbers & a few grand keep him from living in it--he'd just have to decide what his breaking point was in terms of second-guessing himself after the fact; i.e., 5 years from now will you be able to say that you are happy in the house even though you paid more for it? Or are you going to kick yourself until the day you die & wish you had acted when the interest rates were low? You can't graph that kind of thing, unfortunately. I did figure out a single case for a friend of mine who had this question. Here’s his example: Financing $300,000 for 30 yrs at 5.5% now, or financing the same house, where the price has theoretically dropped to $260,000, at 6.5%. In the first case the total amount of interest paid is $313,212.12, with a monthly payment of $1703.37. In the second it’s $331,615.67, monthly is $1643.38. I told my friend that for these numbers, I’d consider this pretty much a wash in terms of overall interest & that he wasn’t going to save a huge amount by jumping on the lower interest rate: In this case, he can bide his time a little. Financing $260,000 at 7.5%, though, things are starting to get skootchy: Overall interest is now $394,464.78 & monthly payment $1817.96. In that case, the price drop would not be worth the savings he could get by going with the lower interest rate, IMHO.

I did tell him, though, that one advantage to waiting for prices to drop, even if the interest rates are a little higher, would be that something previously out of his price range might fall into it & possibly he’d get more house that way. He’d just have to keep an eye on the interest rates. Finally, I told him that if he is looking at his perfectamundo, all-time dream house today, he should not let the numbers & a few grand keep him from living in it–he’d just have to decide what his breaking point was in terms of second-guessing himself after the fact; i.e., 5 years from now will you be able to say that you are happy in the house even though you paid more for it? Or are you going to kick yourself until the day you die & wish you had acted when the interest rates were low?

You can’t graph that kind of thing, unfortunately.

]]> By: Tyler Wood http://www.thetimwoodgroup.com/2009/11/22/a-buyers-dilemma-waiting-for-prices-to-drop-vs-interest-rate-hikes/#comment-983 Tyler Wood Sat, 09 Jan 2010 20:02:28 +0000 http://www.thetimwoodgroup.com/?p=3706#comment-983 Thanks Dee. I'd have to think about that one for a while. I didn't put this graph together but I may be able to put something together that fits what you've described. Thanks Dee. I’d have to think about that one for a while. I didn’t put this graph together but I may be able to put something together that fits what you’ve described.

]]> By: Dee http://www.thetimwoodgroup.com/2009/11/22/a-buyers-dilemma-waiting-for-prices-to-drop-vs-interest-rate-hikes/#comment-897 Dee Mon, 04 Jan 2010 17:04:52 +0000 http://www.thetimwoodgroup.com/?p=3706#comment-897 I'd like to see the graph reconfigured to show difference in overall home price for each point drop versus total interest paid over the life of the loan for each half-point increase. I think that would be more meaningful than looking at monthly payments. I’d like to see the graph reconfigured to show difference in overall home price for each point drop versus total interest paid over the life of the loan for each half-point increase. I think that would be more meaningful than looking at monthly payments.

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