I'm looking at buying now in a suburb of Chicago. Housing prices have risen roughly 50% over the last 3 years, and they are still rising month to month. I do have the feeling that we are at some kind of unsustainable peak, but what's a buyer going to do?
Also-
I think that interest rates will rise towords the end of the year, or starting next year. Here is how I would net out:
for a $300,000 loan:
7% = $1996 P and I monthly
8% = $2201 P and I monthly
Net difference = $205 monthly in interest alone.
If prices fall 10% and you can get the houses for 10% left:
for a $270,000 loan:
7% = $1796 P and I monthly
8% = $1981 P and I monthly
Net difference = $185 monthly
Difference between $300,000 and $270,000 loan:
7% = -$200 P and I monthly
8% = -$220 P and I monthly
It doesn't appear to me that pricing is going to fall unless interest rates go up, so, in my estimation, I would be looking at the $270,000 loan at 8% so the difference between $300,000 at 7% and $270,000 at 8% would bring me a savings of $15 per month, although I would lose 10% of my equity in the short run (roughly $6,600 if I put 20% down)and I would have slower equity appreciation in both the form of market conditions and interest vs principal payments.
Now, we could also be in for a nasdaq style correction, where home prices drop 40%, unlikely, but still a possibility.
Any thoughts? |
