Which to watch....prices or interest rates? A BLOG 2 make U think....
I think by now everyone including those isolated souls in the middle of an Amazon jungle know that home prices have fallen...and fallen...and fallen.
One thing I do remember from my Wall Street days is that NO ONE can perfectly time the market....
So to that I ponder a few questions..............
1. Can a home price go to zero? If the answer is no...what is the full liquidation level arrived?
2. Can home prices be below replacement costs of the materials? If so....for how long?
3. If interest rates rise (which is expected in an inflationary environment) what happens to the cost of money?
4. What is the true cost of owning vs. renting...and is it worth it?
I personally feel that we are at historic levels on home prices in the Tampa Bay area. There are currently homes offered at prices as much as 80% off their peak levels! Most median prices are down as much as 45%! It has been a free fall to say the least, however I sincerely believe a home is worth something and they can not be worth less than zero.
With that said, let us assume the average person believes their "COULD" be another 10, 20, or even 30% drop further. My answer is why would that happen? Think about it for a moment....... Could it be supply & demand? I would ponder not due to the fact that we are already at inverted levels and thus the free market place factors that in..... Could it be foreclosures? Once again I would ponder not due to the same as mentioned above plus the added heat brought on by NAR about "low" appraisals ... so in conclusion............what could cause prices to drop further??......
answer....
Interest rates.
When it cost more to borrow money, demand slows and thus puts price pressure on homes. However here poses the meat of this article....
" If interest rates go UP one percentage point.....how much does a home DROP have to occur to remain and keep the same mortgage payment as buying a home today at today's rates"?
answer....
a little over 12% +/- more or less.....
So in conclusion.........waiting is not a good move because even IF there is perfect timing...it is almost certain to be offset by higher interest rates!
The time is historic and now...only question is will YOU read about history...or make History!
As every market is different and every persons personal situation is unique, ALWAYS check with your local team of professionals before entering into any contract to purchase or sell real estate.
DJB Realty, LLC is a boutique real estate firm that caters to entrepreneurs in representation of business opportunities and investment real estate. David J. Britton, broker/owner is the founder and a principal investor. To explore the synergy of working with DJB Realty, LLC please visit our website at www.djbrealty.com.
Have a great day!