Real Estate Information Archive

What if you could live in a larger and possibly newer home for less than you are currently? Would you consider moving? Do you want to hear more?

Interest rates, while they’re expected to go up, actually took a small dip and are still hovering at the 4% or below mark for a 30 year mortgage and almost one percent less for a 15 year term.

Let’s assume that you have a $225,000 mortgage currently at 6% which has a principal and interest payment of $1,348.99. With a 4% rate, you could have a $282,561 mortgage with the same payment. A $57,000 more expensive home could help you get what you need most such as more square footage or a different location or a newer home.

If you’re going to be making that payment for years to come, why not allow lower interest rates to help you get the features you want without having to necessarily pay a higher payment. Taking that logic a little bit further, let’s see how utilities can make a difference too.

A newer home could easily have lower monthly utility costs than your current home due to being more energy efficient. Construction materials, windows, doors, insulation, modern HVAC systems and energy efficient appliances all contribute to lower utility costs. A new home with these advantages could easily save a homeowner up to 25-50% on utilities for the same size home.

The concept is simple: get the most home you can for the amount you spend on the payment and utilities. It will take some investigation and your real estate professional can help. 

The two most frequently quoted constants in life are death and taxes.  Two more things would-be homeowners can expect in the near future are increases in mortgage rates and housing prices.

Interest rates have been kept artificially low for several years by the Federal Reserve in an effort to strengthen the economy. Policy is shifting to allow them to seek their own natural level and that will surely result in higher mortgage rates.  Rates on 30 year fixed mortgages are up over 1% from January, 2013.

Foreclosure activity is down, new home starts are up and prices have been increasing in most markets for two years.  Most experts agree that the cost of housing is going up.

If the price were to go up by 2% and the mortgage rate by 1% while a buyer is “sitting on the fence” making a decision, the payment would go up by almost $175.00 each and every month for the term of the mortgage.  Even if a person can afford to make the higher payments, what could they have done with that extra $175.00 a month?  Buy furniture?  Car payment?  Principal reduction?  Retirement contribution?  Save for a rainy day?

Click here to determine what the cost of waiting to buy will be using your price home.

We’ve probably all said or at least thought “if I knew then, what I know now, I would have done things differently.” We should have stayed in school longer. We should have listened to our parents. We should have bought Apple stock in 2002 for $8.50 that sells for $400 today. Or we could have bought gold in 2000 for under $300 for a four-fold profit today.

Years from now, if we look back at 2012, we may say that it was the best buyer’s market ever. Even now, in 2013, it’s apparent that both housing and mortgage prices are going up and they may never return to the record low levels.

The housing affordability index, which is considered to be good at 100, had increased to over 200 this past December, January and February. Shrinking inventories and rising prices in most markets have caused the index to fall to 172.7 for May 2013.

This market applies equally to acquiring a home to live in or a home to use as a rental. It is estimated that about 30% of the property purchased last year was done by investors. It is understandable because the positive cash flows far exceed most other investment alternatives.

Homeowners moving up in a rising market may sell their home for more by waiting but it will also cost them more for a new house. Typically, a person buys a 50% larger home when they move up. If they wait for prices to go up 10% on the $150,000 home they're selling, they’ll realize $15,000 more but will pay $22,500 more for the new home purchase. They’ll actually net $7,500 less by waiting for prices to go up and may have to pay a higher mortgage rate too.

The question homebuyers and investors alike are faced with today is whether they will be saying years from now that they seized or missed an opportunity of a lifetime.