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

Numbers Don't Lie, But Wherein Lies the Truth? (Posted November 21, 2016)

Said with enough conviction, you can make almost anything sound true.   Preface the fabrication with “according to a recent bi-partisan government study,” and you’re three quarters of the way to selling the lie to a lot of people.   Seriously, try this. The next time you’re at a dinner party or having coffee with friends, pepper this little tidbit into the conversation: “I read something really interesting the other day.   According to a recent bi-partisan government study – I think it took them three years to get it all done – middle-aged men who drive either a Toyota Camry or a Honda Odyssey have more testosterone than younger men who drive either a Ford F150 or a Dodge Charger.”   You’ll get some raised eyebrows and looks of mild disbelief, but don’t let that deter you.   Just lift up your hands, palms outward, and say, “I just think it’s interesting, and it makes sense when you think about it” – and then change the subject to something completely u...
Post a Comment
Read more

Couching Your Savings Correctly (Posted July 25, 2016)

I recently read an article online about a gentleman who set a goal to purchase a home and then mapped out very specific steps as to how he would reach that goal.   Personally, I was extremely impressed by his discipline and foresight.   His goal had two parts to it: save $150,000 for a down payment and purchase a home.   Before you choke on your coffee or spit soda through your nose, let me disclose here that the gentleman who is the subject of the article was purchasing a home in the New York City area.   Now that your blood pressure is returning to normal and you’ve spared your freshly ironed white shirt from staining, I’ll give you a breakdown of his plan: •   Starting in 2007, he looked at his annual salary and then took a look at the amount of credit card debt he was carrying; he cut back on as many expenses as possible so he could pay off that credit card debt in the first year.   Touché! •   He kept his lifestyle scaled back to the poin...
Post a Comment
Read more

Dumb as (or Smart as) a Box of Rocks (Posted June 27, 2016)

Obviously, you all want to know what Brexit means to the economy and the housing market specifically.   So do I!   But since my crystal ball is at the cleaner’s, let’s give the Brits and the European Union a little time to work out the terms of their separation and look at something else.   What’s a “fad ”?   With the help of Google, this is what I got as a definition: “an intense and widely shared enthusiasm for something, especially one that is short-lived and without basis in the object's qualities; a craze.” In April 1975, an advertising executive by the name of Gary Dahl invented the Pet Rock.   The idea came from his sitting in a bar with some friends who were complaining about the cost and time required to take care of various types of pets.   He marketed his “pets” by placing a rock in a box cut and shaped like one you would get at the pet store to carry home a puppy or a kitten.   Along with the box and the rock, a booklet was included...
Post a Comment
Read more