Thinking about a move in the next 1-2 years?
If you haven’t already heard the $8,000 first time buyer tax credit was extended and a current homeowner tax credit of $6,500 was added. To take advantage of either credit you must have an accepted offer by April 30, 2010 and close no later than June 30, 2010. Ask me for more details to see if you qualify (414.416.0704 or mkoch@shorewest.com).
In addition to the credits, many buyers, first time or thereafter, are realizing that this real estate market is a great opportunity to take advantage of low sale prices and historically low interest rates. Many economic experts are telling us that after the tax credit deadline, we could see interest rates take a sizeable jump higher. Most are predicting at least 6%.
So, what exactly are we getting at here? Well, for starters, the Wisconsin housing market is predicted to return to 2006 pricing levels between 2014 and 2017. That is a long way away. If you have thought about a move between now and then, consider this example:
You are comfortable paying $1300 per month (principle & interest only) on a 30 year mortgage for a new home. Monthly Payment: $1300 @ today’s interest rate of 5.25% = the loan amount of $235,420 or a $244,000 purchase price with 3.5% down.
Monthly Payment: $1300 @ 6.25% = the loan amount of $211,135 or a $219,000 purchase price with 3.5% down.
Here’s the conclusion: If rates jump up even by 1%, it just lowered the price of the home you can purchase by $25,000!
The news is really the same - if you can sell now and you want to move before 2016, now is the time! Could you make more money on your house if you wait? Possibly, but consider this example:
Sell a $200,000 home in today’s market and buy a home with a loan amount of $250,000 vs. the projected scenario for the same properties in the 2016 market.
| Sale Proceeds | New Loan Amount | Monthly Payment |
|---|---|---|
| $0 | $250,000 | $1380.51 at 5.25% |
Waiting until 2016
| Sale Proceeds | New Loan Amount | Monthly Payment |
|---|---|---|
| $15,000 | $265,000* | $1631.65 at 6.25% |
*$265,000 using the proceeds of $15,000 from sale of current home to purchase a $280,000 home.
Remember, if your home price increases, so do the prices of the homes you want to buy.
Here’s the conclusion: Even if you wait for your home to increase so you can get more money when you sell to put down on a new one, you will still pay a higher mortgage payment each month because the interest rate will be higher.
We realize that this can be very confusing, but felt that it was really important for all of you to know. We would be happy to talk with you further about your particular situation to see what makes sense for you. Just give us a call at 414.416.0704!
Posted by:
Mickey Koch
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