I see many West Linn real estate buyers are standing on the sidelines waiting for home prices to hit rock bottom. They are afraid of getting in the game thinking that the prices will be lower next month. They want to guarantee that they are purchasing at the best possible price. The data shows that prices might still have some room to fall in most West Linn nieghborhoods. So, how could waiting for the lowest West Linn real estate price a bad financial decision? While buyers should concerned about housing prices, they should also concerned about cost. The cost of a house is made up of the price AND THE INTEREST RATE they will be paying.
The National Association of Realtors (NAR) released their 4th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year:
The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009.
INTEREST RATES
The Primary Mortgage Market Survey released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said:
“Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week. As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.”
So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a West Linn home this year? The price is the same. It just costs more.
Let’s take a look at an example:
If you were to buy West Linn real estate now at $300,000 with 4.75% interest rate, you could be paying $2042.40 per month. We are assuming that this buyer has an FHA loan.
Now if the same home was on the market later with a $10,000 price drop ($290,000) but the buyer is now paying a higher (5.75%) interest rates, the new payment could be $2159.35.
In this example, buying now would one would have a to put down $350 more cash to close, but would be saving $116 per month, more than making up for the cash out of pocket by the 3rd month of payments. Taking another step out, over 5 years that is over $11,000!!!
The average price for West Linn real estate is just over $348,000 (so far for the 2011 year), so these savings/payments would be even more.
Take a look at this data and information brought to us by Ginny Schider at the Real Estate Loan Company
https://edge.mortgagecoach.com/report/edgereport.html#38971-0-0-37050
Bottom Line
Even if prices fall a this year, the cost of a home will increase if interest rates continue to go up. Buyers should not only worry where prices are going, they should also be concerned where costs (price + interest rates) will be.
As for finding that elusive bottom of the West Linn real estate market, only by looking at recent sold numbers can we tell when we passed it. In other words, we will not know when it was until we are on the other side, looking back.
To view West Linn real estate listings, click on the map
Rich Peralta is a real estate professional in the Portland Metro Area West Linn Real Estate and Lake Oswego Real Estate.
He can be reached at 503.961.2181 or by e-mail at rich.peralta@exprealty.com
Contact him for more information on Portland Real Estate and Lake Oswego Real Estate!
Also posted on Portland Real Estate.
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