I was talking with a perspective buyer the other day. They were doing all the right things; lease ending in 6 months so begin the home search process online, find a Realtor (me), talk with a lender and determine affordability. Then…decision time…they decided to wait another year. Not necessarily a bad choice. Everyone has different needs & tolerances for the idiosyncrasies of this economy. However what I think many fail to consider is the cost of waiting to buy. While this approach has rewarded those that held off the past 2 years in the form of lower prices and lower interest rates, rates are rising and according to the many economic experts, prices are stabilizing. In fact, in Lincoln Park, some individual home prices seem to be up slightly. When comparing the overall condo sales prices for the year to date in 2011 vs the 4th quarter of 2010, the average closed price is up 5.3%!
So here’s our dilemma…Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. And if prices remain constant and rates go up… well…buyers should not worry where prices are going, they should be concerned where their costs will be later in the year (courtesy of the kcm blog).
While none of us have a crystal ball, the option of buying now is definitely worth considering. Indications are that interest rates are on the rise but no one knows just how much they will go up. Where are you in this paradigm?