Instantly, a financially savvy individual (or just anyone who know’s the basics of what interest is) will look at 6.95% interest rates and understand that now is NOT a good time to buy. WHAT? A realtor who’s livelihood relies on buyers and sellers telling me it’s not a good time to buy?

Here are my thoughts on the situation.. Unless you can get a home for a steal of a deal to rationalize high interest rates, you shouldn’t buy right now.

The good news is, the odds of buyers purchasing a home for under list price and significantly less than what it would have been sold for 6 months to a year ago, are EXTREMELY HIGH right now. The average days on market in this area have increased to over 60 days.. 

So imagine this.. A 3 bedroom 2 bath home 6 months ago = $400,000 at 4.5% interest 
The same house now = $325,000 at 7% interest with 60 days on market. 
You could potentially purchase this home for $300,000 at 7% interest..

The math on this scenario equates to about a $70 difference in monthly mortgage payment if you were to purchase at $300,000 at 7% interest over $400,000 at 4.5% interest.

Then the plan should be to refinance if and when interest rates decrease again (which to be transparent will cost 2-5% of the loan amount).

The advantage of buying in this market is that the price of homes are decreasing and sellers are getting desperate to sell. The disadvantage is obviously interest rates but if you can work the purchase to make the mortgage payment fit within your means and plan to refinance in a few years, it could be to your benefit in the chance interest rates hit 15% and don’t drop below 7 again.. 

Here’s the scenario of a buyer who SHOULD consider buying: 

– An individual or couple who is currently renting (or moving to a new state) at $1700-2200+ and is looking for a home to invest that money into, without emotion. 
You should be looking for a reasonable home that has been sitting on the market for 30 days or more and work with your realtor and lender to offer a price, that considers interest rates, to match your ideal monthly mortgage payment. The offer on this home should be 25, 50 or even 100k less than the list price.

The approach should be logical, not emotional, as with what we call “low ball offers,” you can piss off sellers to the extent of them not even considering a negotiation and ignoring your offer altogether. In which case, you’d need to be willing to shrug and walk away, and not feel an emotional disappointment or loss for not getting the house at a discount. 

One of the big issues with the market right now, is sellers who missed the boat on selling their house for $100,000 over it’s value, are now feeling like they’re being jipped. They are still starting with a high list price and having to work through several price drops before getting an offer. They’re being forced to settle with a more reasonable sale price and cash out at less than they had hoped. Buyers need to take advantage of this and realize that this PRO could scratch the con of high interest. 

What do you think?