Is It Safe To Buy in a Down Market of Falling Home Prices?

If you are home owner facing home foreclosure, you might want to sell your home for a more expensive price. If your real estate agent advises you to sell your home right away, then he must be right.

MortgageThe longer you wait to sell your property, the greater the risk that the price on your property will fall. If you have plans of purchasing a new home in a down market, then all the more reason for you to make the sale as soon as you can. Let’s analyze the situation closer.

Selling Your Home

For example, the original market value of your home is at $200,000 and now you have to sell it prior to foreclosure. Of course, to attract more buyers you’re cutting down the price by at least 10% which means your loss on your property will amount to $20,000.

However, if you bought your home at a purchase price of $100,000 and you’ve made a sale of $180,000, doesn’t that put you ahead of $80,000. If you were renting a home, you’ll still be paying for your monthly rent and if you’ve been staying in your present home for 10 years now, then it’s really not so bad after all. If you try to wait a longer hoping to sell at a higher price, you might end up waiting in vain.

Consider the Interest Rates When Buying

Another thing you need to consider is the interest rate in the market. It is crucial to observe the current trend in the market. If the interest rates are falling, then it would be to your advantage. However, if it rises, as the usual case is, you’ll be on the losing end.

For your information each half point increase in interest means $25,000 less from your purchasing power. As the interest rates go up, your purchasing power also decreases. If you wait too long before purchasing the house you want, rising interest rates can overpower you.

For example, if you qualify for a fixed-rate mortgage loan with a 20% down payment, at 6.25% interest, you can afford to buy home with a value of $525,000. If the interest rate increases to 6.75%, the value of your home cuts down to $500,000. At 7.75% interest, the value of your home becomes $450,000. If you wait a little longer and the rate of interest rises to 8.25%, the value of the home you can afford to buy drops to $425,000. All the same, regardless of the interest rates, you’ll still be paying for a monthly mortgage not exceeding $2,500.

As you can see, for the same amount of mortgage, you can get a home with a higher selling price and more value. Obviously, it’s not about just about waiting longer, hoping to get the best deal. For this reason, you need to be aware of the trend in the Index Market to be sure about your next move.

A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don’t panic over newspaper headlines. Make an informed decision. Run your own numbers.

Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

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