For Homeowners

Timing is Everything…

I had two separate conversations this weekend that refreshed in my mind how many people are overlooking the importance of the combination of the current interest rate market and the now much lower purchase prices for houses.  This morning I put some numbers together to help quantify to real savings.

To make this as simple as possible we have to make a hand full of assumptions.  First, let’s assume the housing prices have fallen by 25%.  Depending on where you live this number could be significantly higher.  Next, let’s assume that the average 30 year fixed interest rate was 5.75% back before housing values and mortgage rates started to fall.  Next, let’s use a $350,000 purchase price today, which would have been $437,500 at the top of the market when everyone was eager to buy.  For simplicity’s sake we are going to also assume a 20% down payment.

There are many ways we could look at this number but let’s just compare principal and interest payments.  At the top of the market, the $437,500 purchase price with 20% down would have had a principal and interest payment of $2042.51 assuming the 5.75% interest rate.  Today, the discounted $350,000 purchase price of the same house with 20% down and using the average interest rate for all 30 year fixed loans I locked last week of 4.375%, the payment would be $1398.00.  This payment is a 31.6% savings vs. buying the same house at the top of the market.  In dollars, that is a $644.51 savings for the same exact house today.

Nobody knows how long prices and interest rates are going to stay at today’s levels.  Maybe they stick around for a couple months…maybe they stick around a couple years.  What I do know, is everyone likes to buy when things are on sale.  With nearly every house on the west coast currently on sale for at least 1/3 off, and many areas over 50% off, now definitely feels like a great time to buy.  When was the last time you saw something on sale at Nordstrom at 30% off and the asked the sales associate if it was going to be cheaper soon?

Whether you are a first time home buyer, a move up buyer or an investor I would love the opportunity to discuss with you if now is the right time for you to make a move.  If you or anyone you know is thinking about or has mentioned possibly making a purchase please call me.  I will do a very objective analysis to see if now is the time.  Also keep in mind the possibility of refinancing if you already have a mortgage.

I look forward to talking to you soon.

Franklin Loan Center | NMLS 237653
Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, 4131316
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