Buyer Tip – Cost vs Price
As a seller, you will be most concerned with the ‘short term price’ – where home values are headed over the next six months. As a buyer, you must understand the difference between cost and price. You should be concerned not with price, but instead with the ‘long term cost’ of the home. Many economists have pointed to Brexit (Britain’s exit from the European Union) as a reason that interest rates will remain low for the next few months. But Trulia’s Chief Economist Ralph McLaughlin warns that this will not always be the case in a recent post:
“While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”
The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and Freddie Mac all project that mortgage interest rates will increase by close to a full percentage point over the next twelve months. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 5.3% over the next 12 months.
What Does This Mean as a Buyer?
Below is a simple demonstration of how an increase in interest rates can greatly impact mortgage payments. If a home is selling for $250,000 today, and home prices are supposed to appreciate by 5.3% (as predicted by CoreLogic) over the next 12 months, the difference is astronomical. Check it out for yourself:
Are you thinking of buying or selling a home, or have a friend or family member who is? Contact The Pivec Group today by calling 443-692-8800 or visiting our website! We look forward to hearing from you and helping you find YOUR dream home!