Waiting for a bargain, missing the bargain

Dated: July 11 2020

Views: 15

On Christmas Day of 2019, home prices were continuing the steady appreciation that was the trend throughout last year, and interest rates were at a fairly attractive 3.99%. A buyer who borrowed $450K to buy a $500K house that month would be making monthly payments of about $1,907, and the total cost to pay off their mortgage would be $686,648.

Many people expected (especially after the Coronavirus hit) that 2020 might bring a market correction, and they could get a better deal by waiting for home prices to drop. So far, this hasn’t happened—but if prices had gone down 10%, that same house would have cost $450K. If interest rates were unchanged, that would generate monthly payments of $1,716, and a total payoff cost of $617,983. Over the life of the loan, that lower purchase price would mean $68,665 in savings.

Here’s what has happened in the last six months: interest rates have dropped all the way to 2.88%. The $500K home still requires a $450K mortgage, but now the mortgage payoff amount is only $538,047—a savings of $148,601! Long story short—if you have been waiting for a favorable market before looking seriously for a home, you might have missed the fact that it has already arrived.

Blog author image

DAVID DUNLAP

As a residential real estate executive with an extensive background in corporate marketing, I am able to apply unusually strong skills in marketing communications, e-marketing, strategic planning and ....

Latest Blog Posts

How to inspire success

When I attended my high school reunion last month, I had the chance to tour the campus, which had seen many improvements since the time when I was there every weekday. One striking spot was the

Read More

Sometimes, distrust your instincts

Sometimes our natural inclinations can betray us when we try to apply them to the strategy of real estate transactions. It’s totally natural, for example, for someone about to spend ten times

Read More

How to look ahead

For anyone considering buying or selling real estate, the question of which direction the market is about to go is very interesting and important. Like Wayne Gretsky looking to skate where the puck

Read More

Escrow banishes the ghost of transaction past

The length of time an escrow lasts is usually determined by the requirements of the mortgage funding process—a good loan officer can get everything done in 30 days, while others might require

Read More