This time of the year my wife and I start to prepare for Christmas and begin to shop for gifts for our three daughters. It takes some work to find these early bargains but they are out there, and usually with a lot less stress since there is not as many buyers in the stores and the environment is not as frantic.
Now think ahead 3 months about the ads you see leading up to Black Friday. A sweater could be half off on Black Friday: It could be 75 percent off by Christmas, or it could sell out at anytime. If you want that sweater and you can afford the sweater, buy and enjoy it now or you may risk the chance on missing out on the opportunity to purchase.
So what do these two stories have to do with the Metro Detroit Real Estate Market and Black Friday? I am sure you are aware of the US getting a credit down grade last week from an AAA rating to a AA+ rating. This morning we are waiting to see how this will impact the interest rates, especially for mortgages. Many consumers feel that this is a “Buyers Market” and that they still have the upper hand when it comes to negotiating for a home. I predict that over the next few months there will be a lot of buyers who will enter the market that have been waiting for the market to hit bottom. The bigger picture of what I would focus on TODAY is mortgage rates. What if mortgage rates increase by .5% or even 1.0%? With a home that is $200,000 and has a mortgage for 30 years, if the rate increases from 5.0 to 6.0% that would mean the difference of paying over $43,000 more over the life of the mortgage with just a one percent increase.
I am predicting in the very near future we are going to see these rates start to increase and in return you will start to see a large amount of home buyers start to purchase real estate. Yes home values may drop some more but you will save much more in the life of the mortgage by locking in to a rate and securing your payment not to mention you will have a larger selection of homes to choose from now rather than waiting. When rates increase, this may cause surge of buyers into the market and with more buyers, this may result in less inventory and you may not get that perfect home you were searching for.
Again, I don’t think the price of homes will go up substantially over the next year but I would bet that interest rates will. So if you have good credit, a good down payment, you may be set to make the best deal you’ll ever make TODAY. Even if prices of homes drop further, and they may or they may not, the prospect of higher interest rates may be a much more daunting reality to have to deal with.