Skip to main content

Sitting on the Fence Only Gives You Splinters


“I woke up this morning and couldn't find my socks, so I called information.  She said they were behind the couch.  She was right.”  Reading the words of comedian Stephen Wright isn’t quite the same as actually hearing them with his deadpan delivery, but they’re still funny.  The same can be said for timeless wisdom: whether you hear it coming directly from the lips of a wizened old sage or you read it in a little missive such as this, it’s still wisdom, right? 

They say a picture’s worth a thousand words, so you’re about to get 2,000 words’ worth right here: I’m going to show you two graphs that are going to speak volumes about buying power and interest rates – far more than I could convey if I tried to write over 2,000 words (and probably put you to sleep).
 
Obviously, this first graph shows how even a slight change in interest rates can affect someone’s buying power in the real estate market.  There’s a fairly big swing between what someone can afford at 4.5% and 5.5%.  For example, with a monthly P&I payment of $1,600, a buyer could afford a home just under $400,000 at 4.5%, while that same payment with a 5.5% interest rate could only buy them a $350,000 home – those are vastly different neighborhoods, and that could also spell the difference between staying in that home for 7+ years or having to move in 3-4 years to accommodate a larger family, not to mention what home prices may be in 3-4 years when that move is necessary.

This next graph shows interest rates going back to when they peaked in July, 2008 at 6.63%.  I don’t have a crystal ball, and I have absolutely no insider information about what will happen to interest rates in the next ten years or even ten months, but using historical data has always been a fairly good way to predict what’s coming.  Clearly, interest rates aren’t going to shoot up into the stratosphere tomorrow, but they look like they’re certainly on the climb.  The takeaway from this is very simple: if you or anyone you know is on the fence about buying, these two graphs make a very good case for getting off that fence and start looking now – you’ll get a better night’s sleep in a home than on a fence, right?

Comments

Post a Comment

Popular posts from this blog

Posted August 31, 2015

Fast . . . So They’re Not Furious InSellerate , a lead-generation company, conducted a study that yielded some very interesting insights: •    32% of consumers expect a company to respond to an online inquiry within 30 minutes •    42% of consumers expect contact within one hour •    M ore than half of the companies studied (56.34%) did not respond to the online or email inquiry at all Of those companies that did respond, the average response time exceeded 24 hours, and the primary response vehicle was email, which is a passive, relatively non-effective method of contact .   The take-away thought from all of this is “no kidding”, of course, but it underscores the wisdom that a lead is only as good as the work you put into it. Safety Over Sales According to a USA Today article, realtors in Iowa are taking steps to ensure the safety of all agents. The initiative includes an optional seller contract that prohibits any agent from ...
Post a Comment
Read more

Rates are Overrated

Buckle up and get ready to have your mind blown!   Okay, it’s not THAT mind blowing – some of you might even say, “well, duh” – but it’s still interesting. The economists (that’s a fancy term for “the smart folks”) at the New York Federal Reserve published the results of a study, which reveal that changes in down payment requirements have MORE influence over home buyers’ willingness to buy than changes in rates.   Follow me on this – you’ll be glad you did! Surveying both buyers and renters, those smarty pants at the Fed found that the effect of interest rates may be overrated when compared to changes in down payment requirements.   The study found: • Dropping the down payment from 20% to 5% INCREASES the willingness to purchase, on average, by 15% among buyers and 40% among renters • Decreasing the interest rate on a 30-year fixed-rate loan only raised the willingness to purchase by 5%, on average If you’re straddling the fence between BUY RIG...
Post a Comment
Read more

Perspective Produces Progress

Each week I try to write something that will either make you think about a rather humdrum mortgage/real estate topic in a new way or at least clear the cerebral cobwebs.   Admittedly, some weeks I’m better at accomplishing that than others – my apologies for those “off” weeks.   As I’ve been trying to come up with a topic for this week’s missive, it’s not so much that I’ve been hitting a brick wall that’s been keeping me from inspiration, it’s that I’ve felt sort of “dragged down” by so many things that have been happening here in our own backyard over the past few weeks that have been . . . less than inspiring.   It seems that wherever you turn – TV, radio, Facebook, Instagram , newspapers (they still exist) – one party isn’t happy unless the opposing party is proven wrong and/or devastated.   I’m not advocating the philosophy that “everyone’s a winner and should get a trophy just for showing up” – I’m an advocate of just the opposite when it comes to c...
Post a Comment
Read more