Too Scared to Buy in this Housing Market?

Plenty of buyers are not just sitting on the fence; they are tied to the fence when it comes to writing offers on homes. The biggest worry most have is whether home prices will fall even more, thus fearing they will have spent too much money on a home. Waiting to find out could cost you more than you think! By the time buyers recognize the market has hit bottom, it will already be on the way up again. One way to avoid this impasse on buying is to understand the benefit of extraordinarily low interest rates available today, and lost opportunity costs of not having the tax deductions associated with owning a home. Here’s an example. Suppose you buy a $400,000 home with 5% down payment and take out a 30 year fixed loan at 6% interest. The monthly principal and interest would total $2278. Okay, let’s say you wait another year for the price to drop 10%, but the interest rates go up to 7%. The monthly payment will be $2275; a whopping big savings of $3 per month. Hardly worth the wait, and for a year you lost the deductions for tax and interest which amounts to approximately $16,000, or $4000 after tax. Another thing to keep in mind is the shrinking inventory of homes for sale. As it declines further, the buyers will be competing for fewer homes which may cause prices to stabilize, or even increase slightly.