Cheer Up Home Buyers - It Could Be Worse!
What a crazy new year’s this has been in the housing market! To give you a little insight on how badly people want homes let me tell you about the 3 homes my clients put offers on just this week. One place had 13 offers, one had 16 and the last place had 36 offers and sold for $150,000 over the listing price which was set at just $589,000! I feel for all you buyers out there, but it could be worse and here’s why.
Why are people so desperate for homes in this seller’s market? Because they are trying to lock in these historically low interest rates while homes are still reasonably priced. But both these low interest rates and low home values could be rising soon… and fast, because as the market gets stronger the interest rates will come up with it since people don’t need as much as an incentive to buy anymore.
This chart does a good job explaining how much your monthly mortgage can go up with even just a percent increase in interest. Now, let’s be realistic, here in San Francisco most people aren’t going to have a mortgage for $150,000 because that’s not going to get you much in the City of opportunity. A $500,000 mortgage is more like it with a median home/condo price of $715,000 this last month. To break it down for you, you can see below what the current interest rates are for a 30 year fixed mortgage.
Loan Amount Interest Monthly Payment Amount Increased
$500,000 3.5% $2,245 0
$500,000 4.5% $2,533 $288
$500,000 5.5% $2,838 $593
$500,000 6.5% $3,160 $915
With just a one percent increase in interest monthly payments go up $300 a month… that’s $3,600 a year and that’s just one percent! God forbid it ever got up to 6.5% where you’re paying an extra $900 a month compared to today’s prices or an extra $10,800 a year, yikes! Ok ok, so what are the chances it ever gets up to 6.5%, that’s almost double what it is at right now. Well folks, it hasn’t always been like this, look at this data below.
So you get the point, as crazy as this market is with all the competing buyers and the offers over asking price it’s better to try and get a home now than to wait even a year. Who knows where interest rates and home prices will be at that point. Even just a year ago this time the median home/condo prices were only $550,500. In the same exact month this year from 1/14 – 2/14 the median prices have gone up to $715,000 and they will only be rising more as this market rebounds from the crash we had a few years ago. It could take you a while to find a home in this market but with some patience and good advice you could find a home in this market.
Godspeed my friends, on the journey to the “American Dream.” Contact Jon Gilkeson, the San Francisco Real Estate Guide, for any questions regarding home ownership