An article came out today by Fiserv, a financial information and analysis firm, predicting housing prices would fall nationally 11.3% by June 30th, 2010. This may or may not be correct, as my crystal ball is fuzzy today; however, I would like to point out a few things to clear up the picture for the person who may be on the fence of whether to purchase now or later. 1. The Fiserv article speaks to an average around the United States. We all know that real estate is about location; thus, can be extremely different from city to city--even neighborhood to neighborhood within a given city for that matter. Los Angeles real estate is much different then Detroit for instance.
2. Areas where there was tremendous investor speculation (ie Miami, Las Vegas, & Phoenix) will be hit the hardest and bring down the national averages, where some cities prices may be rising, albeit at a small clip.
3. Interest rates are hovering at near historic lows currently, and can't stay there forever.
I would like to focus on the last point for a moment, as it is key. I was watching CNN's business correspondent, Ali Velshi, this morning, and I believe he hit the nail on the head. He made the point that should prices slide 11% but interest rates rise just 2%, one would actually end up paying more for the property. Let's use $500,000 as an example. If one were to purchase a $500,000 property now at 5.5%, the interest on a monthly payment would be $2,291.67 (there are other costs involved like property taxes, etc). Now let's say that Fiserv is right and the property is worth $445,000 a year from now, but the interest rate rises to 7.5%, as many economists think it will, one's interest payment is $2,781.25. This is a difference of over $5,800/yr! The beauty is one can lock in the historical low interest rates that are currently available for 30 years.
A home purchase is the largest investment most of us will ever make, and I do not take it lightly. All I am saying is to not only focus on the media reports, as they are not always talking about your area. Also, remember that statistics can be skewed, so delve deeper into the numbers in order to come to the right decision for you and your family. The goal is always to buy low and sell high, but the actual costs associated with the purchase must be factored in.