Picking a Bottom in the Real Estate Market
(or Why Bottoms Can Cost You Money)

Right now, interest rates are LOW even compared to the boom times.  Unless you are paying cash, there is more to consider that just "waiting for the lowest price."  It never works and here is why.

Let's take a loan of $100,000 for 30 years at 5%.  The payment is 536.82.  When the economy starts back  (and there are signs that we could be there right now).  Let's say you wait a little and rates go to 6%, for the same payment you can only borrow $89,537.  The $100,000 loan at 6% is now $600 per month or $63.18 per month for a total amount of  $22,744.8 over the life of the loan.

Here is the scenario, you are waiting for the market to drop another 10%, if rates go up just 1% point, waiting on a $10,000 price drop is going to cost you $22,744.  The reason is an increase to 6% from 5% is a 20% increase in the cost to borrow the money.

The fact most people don't stay for 30 years doesn't make much difference.  Even 10 years means you pay  $9,991 MORE interest because interest is loaded up at the beginning of the loan and not at the end.  Stay 10 years and save $10,000 only to pay it back out in interest.  That is what waiting does.

There are simply too many variables to know what is going to happen now.  Fundamentally, when an economy starts doing well, rates go up.  When we are in the tank, rates come down.

Just something to consider...