In today’s housing environment, this is a question all potential homebuyers should seriously consider.
Let’s review some historical data to help us determine the answer. The Median Sales Price data is provided by the Utah Association of Realtors.
| Median Sales Price | 30 Yr Fixed Rate Range | ||
| 2007 | $196,480 | 6.25 – 6.875% | |
| 2008 | $198,161 | 5.75 – 6.625% | |
| 2009 | $161,000 | 4.75 – 5.75% | |
| 2010 | $158,450 | 4.5 – 5.25% | |
| 2011 – Jan | $165,000 | 4.75 – 5.125% |
You will note the median sales price trend appears to be reversing, while the interest rate range has narrowed. This indicates that Cache County home values appear to have bottomed, while interest rates have remained very low; which is a very good sign for potential home buyers.
If you are sitting on the sidelines waiting to see if prices drop further; let’s see if that’s a good idea, by comparing a decrease in the purchase price to an increase in interest rates.
A 2% reduction in the January 2011 median sales price represents a savings of $3,300. This is certainly a good savings!
However, if interest rates rise only .75% (3/4%), which is certainly within the ranges represented above, the $3,300 saved on the sales price reduction, will be eroded in only 57 months. So, if you are in the home longer than 57 months, you will pay over $57 per month more, because you waited for the price to drop further.
You can be assured if the economy continues its recovery; the Federal Reserve will increase interest rates in order to limit inflation.
So, if you wait for an additional drop in home values before you consider buying a home, you should certainly consider the impact of interest rates on the potential sales price savings.
As Cache Valley’s only Certified Mortgage Lender, I can assist you with this type of comparison, as well as any other that interests you. Don’t hesitate to contact me with any questions!
