What do I mean?
What I mean is that the educated buyer, the one who understands how mind-numbingly low and historically aberrational today’s fixed interest rates are… that person is taking decisive action and shopping with great urgency because of rates.
To this person, who understands the long-term upside of home
ownership… who understands how much personal wealth can be accrued through a 15-year mortgage… and who understands that once he or she buys a home, the
principal and interest payment can never go up (while rents continue to rise)…
this person wants a house and is willing to spend a little more to get it.
Meantime, buyers who don’t understand this market, or buyers
who want to grind on price, or buyers who think their experience will be just
like the experience of a friend who may have purchased during the dark days of 2009 or 2010… very
few of those buyers are actually having success in a highly competitive market.
Now, I never advocate overpaying. Read this sampling of posts from the past few years and
you’ll see, I shoot straight on the subject of value:
* Why It's Not the Same This Time (Oct 3, 2008)
* August Wrap: Buyers Have Upper Hand (Sept 20, 2010)
* Stark Differences Between Condos and Single Family Resale Market (Jan 26, 2010)
* Stark Differences Between Condos and Single Family Resale Market (Jan 26, 2010)
But here’s what it boils down to today:
If you offer $5,000 more for a median priced home, that
decision will cost you about $22 extra per month, based on a 30-year loan at
3.5%. Over the course of a year, that’s
$264 dollars in higher payments.
If you don’t feel the urgency, if you sign another lease and
let this market pass, and rates go up just 1%, you could be looking at an extra
$2,500 per year in interest payments on a 30-year fixed rate loan. Plus, prices are rising in almost every area
below $500,000.
So take action now, write a winning offer, and spend an
extra $264 per year. Or wait 12 months,
pay more for a lesser house, and pay 10 times more than the $264 per year a
$5,000 increase in your offer price would cost today.
The buyers who want into this market are not fooling
around. And there are lots of them. They’re writing serious offers fast and
closing on their new homes.
The buyers who don’t see the big picture are working off rules
that simply don’t apply anymore.
This is a market for the swift and the determined.
