By TED SMITH
Realtors have been sounding the alarm for the last year that low interest rates would not last forever, and that home prices would continue to rise. Interest rates have climbed from an all-time low of 3.31 percent in November 2012 to a two-year high of 4.46 percent by the end of June 2013. In the same time frame, the average home price in D.C. has risen 10.02 percent, from $580,643 to $638,807.
So it was no surprise to read in the July 8 issue of Urban Turf that, in a recent survey of several hundred homebuyers, 38 percent said they were putting their search on hold because of rising rates. But those rates don’t show any sign of coming down soon — in fact, the American Mortgage Banker Association says it expects residential interest rates to rise to 4.5 percent by the end of 2013.
Trulia’s chief economist Jed Kolko has published multiple blogs about the fact that it’s still cheaper to buy than to rent in most American cities (including Washington), and that buying will be cheaper than renting for the foreseeable future until interest rates reach 10.5 percent. Trulia has even published a rudimentary calculator (http://trends.truliablog.com/vis/rentvsbuy-winter-2013/) that shows whether buying or renting is the better alternative in housing markets across the country based on your answers to a few quick questions. The New York Times has published a more sophisticated online interactive calculator buy calculator (http://www.nytimes.com/interactive/business/buy-rent-calculator.html) that allows you to see your “tipping point” where buying becomes a better option than renting, based on your specific situation.
So where does the reality therapy come in? Well, even in the 4-5 percent range, interest rates are substantially lower than they have been for a long time, so your buying power is still much greater than it was when interest rates were, say, 10 percent. On a $500,000 30-year fixed rate mortgage, your buying power will change by about $70-75 toward your monthly P&I payment (principal and interest) for each quarter point that interest rates fall or rise. And housing prices are not likely to drop any time soon. So homebuyers, don’t let the slight increase in interest rates stop you from fulfilling your dream of owning a first home or a move-up home.
Ted Smith is a licensed Realtor with STAGES Premier Realtors specializing in mid-city D.C. Reach him at TedSmithSellsDC@stagesrealtors.com and follow him on Facebook.com/MidCityDCLife , Youtube.com/TedSmithSellsDC or @TedSmithSellsDC. You can also join him on weekly tours of Open Houses specifically geared toward first-time homebuyers. Sign up at meetup.com/DCMidCity1stTimeHomeBuyers/.
- Gordon Thomson, ‘Dynasty’s Adam Carrington, comes out as gay by Mariah Cooper | posted on September 25, 2017
- ‘Matilda’ star Mara Wilson says she regrets coming out after Pulse tragedy by Mariah Cooper | posted on September 25, 2017
- Comings & Goings by Peter Rosenstein | posted on September 25, 2017
- Milo Yiannopoulos’ ‘Free Speech’ rally flops at UC Berkeley by Mariah Cooper | posted on September 25, 2017
- D.C. Office on Aging ‘excited to work with LGBTQ seniors’ by Lou Chibbaro Jr. | posted on September 25, 2017