419A 11th Ave, Seattle, WA | Powered by Postlets
Shared via AddThis
Wednesday, June 24, 2009
Tuesday, June 16, 2009
Have we seen the bottom yet in Seattle?
Have we seen the bottom yet in Seattle? Maybe, maybe not. It depends what neighborhoods and price ranges you are talking about.
The suburbs are still struggling and many properties that have sat on the market for a long time in these areas continue to sit. Condos are tough to sell, as well, largely because financing is tricky for some of those. And homes in higher price ranges (above $600k) are also not moving as quickly (some neighborhoods excluded).
So, where are things turning around? Downtown and north of downtown to about 85th St. has seen a change in momentum in the last couple of months. Particularly in Fremont, Wallingford, Roosevelt, Ravenna, Ballard, Queen Anne, Wedgwood, Greenlake and Bryant where single family homes in good condition are selling quickly and occasionally two or three buyers are competing for the same home. There is an increased demand in the under $600k range.
If you are looking to buy in these more popular neighborhoods, wait no more, I think we have seen the bottom (dare I say it).
Properties south of downtown and north of 85th are more affordable than ever and some great deals are to be had. Take advantage of a strong buyer's market, low interest rates and if you are a first-time homebuyer you most likely qualify for the $8000 tax credit (contact us for more information on who qualifies).
Pending sales are up even in these areas compared to a few months ago, some of which can be attributed to the time of the year (sales always go up in late spring/early summer) , some of it can be attributed to favorable terms for buyers such as low interest rates and the first-time homebuyer credit and I am hopeful it is actually a sign of a recovery.
The Seattle Metro area is one of the "10 Cities Most Likely to Bounce Back" according to Forbes Magazine. Forbes magazine has identified the top 10 cities that it believes are poised for recovery by examining unemployment figures, projected gross domestic product from Moody’s Economy.com, and housing affordability data from the National Association of Home Builders.
Here is Forbes’ top 10:
Austin-Roundrock, Texas
Fayetteville-Springdale-Rogers, Ark.
Boulder, Colo.
Huntsville, Ala.
San Antonio, Texas
Mobile, Ala.
Dallas-Fort Worth-Arlington, Texas
Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
McAllen-Edinburg-Mission, Texas
Seattle-Tacoma-Bellevue, Wash.
Have a wonderful day,
Kerstin
Kerstin G. Brooks
Brooks & Heinze Team
Skyline Properties, Inc.
http://www.propertyinseattle.com/
The suburbs are still struggling and many properties that have sat on the market for a long time in these areas continue to sit. Condos are tough to sell, as well, largely because financing is tricky for some of those. And homes in higher price ranges (above $600k) are also not moving as quickly (some neighborhoods excluded).
So, where are things turning around? Downtown and north of downtown to about 85th St. has seen a change in momentum in the last couple of months. Particularly in Fremont, Wallingford, Roosevelt, Ravenna, Ballard, Queen Anne, Wedgwood, Greenlake and Bryant where single family homes in good condition are selling quickly and occasionally two or three buyers are competing for the same home. There is an increased demand in the under $600k range.
If you are looking to buy in these more popular neighborhoods, wait no more, I think we have seen the bottom (dare I say it).
Properties south of downtown and north of 85th are more affordable than ever and some great deals are to be had. Take advantage of a strong buyer's market, low interest rates and if you are a first-time homebuyer you most likely qualify for the $8000 tax credit (contact us for more information on who qualifies).
Pending sales are up even in these areas compared to a few months ago, some of which can be attributed to the time of the year (sales always go up in late spring/early summer) , some of it can be attributed to favorable terms for buyers such as low interest rates and the first-time homebuyer credit and I am hopeful it is actually a sign of a recovery.
The Seattle Metro area is one of the "10 Cities Most Likely to Bounce Back" according to Forbes Magazine. Forbes magazine has identified the top 10 cities that it believes are poised for recovery by examining unemployment figures, projected gross domestic product from Moody’s Economy.com, and housing affordability data from the National Association of Home Builders.
Here is Forbes’ top 10:
Austin-Roundrock, Texas
Fayetteville-Springdale-Rogers, Ark.
Boulder, Colo.
Huntsville, Ala.
San Antonio, Texas
Mobile, Ala.
Dallas-Fort Worth-Arlington, Texas
Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
McAllen-Edinburg-Mission, Texas
Seattle-Tacoma-Bellevue, Wash.
Have a wonderful day,
Kerstin
Kerstin G. Brooks
Brooks & Heinze Team
Skyline Properties, Inc.
http://www.propertyinseattle.com/
Friday, February 27, 2009
What is the Homebuyer Tax Credit and who qualifies for it
The stimulus plan that President Obama has signed into law as part of the American Recovery and Reinvestment Act of 2009 contains an important tax credit for first-time home buyers: a tax credit of 10% of the purchase price, up to $8,000 for first-time home buyers only.
First-time buyers, for the purpose of this credit, are those who have not owned a home in three years. This new tax credit does not replace the 10% of purchase price, up to $7,500 tax credit passed as part of last year's Housing and Economic Recovery Act of 2008.
So, there are two breaks for first-time homeowners in the tax code now. Which credit you can take depends on when you purchased your home.
If you're a first-time home buyer and you purchased your home on or after April 8, 2008, and by Dec. 31, 2008, you may qualify for 10% of the purchase price, up to $7500 tax credit but you have to pay that back because it's not really a credit, it's more like a 15-year, interest-free loan from the IRS.
Visit the IRS website or consult your tax advisor for the details if you qualify for this credit (loan). The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns.
The full credit is available for homes costing $75,000 or more. Only purchases of a main home located in the United States qualify, and the home must have been purchased after April 8, 2008, and before December 31, 2008. For a home you construct, the purchase date is the date you first occupy the home.
The up to $8,000 tax credit is available for qualifying home purchases made from Jan. 1, 2009, until Dec. 1, 2009 (yes, Dec. 1 not Dec. 31). At least the credit is a true credit and does not need to be repaid, that is, if you don't plan on moving within three years. The home must remain the buyer's "main home" for at least 36 months after the purchase date, which means no selling or renting the home. This won't work for an investment property. If the buyer sells or moves before 3 years have passed, they will need to pay back the credit.
There is also an income limitation and the credit starts phasing out if you have over $75,000 in gross adjusted income for single filers and up to $150,000 in adjusted gross income for joint (married) filers.
A tax credit is much more valuable than a deduction. A credit reduces dollar for dollar the amount of tax you owe. A deduction merely reduces the amount of your income that is taxable.
Please click on the following links to see a side by side comparison of the two tax-credits, repayment requirements, recapture requirements, income limits to qualify, property eligibility, amount of credit, etc.
Tax Credit Chart (Source: National Association of Realtors)
http://www.irs.gov/newsroom/article/0,,id=204671,00.html (IRS.gov Website)
If you are still not sure which and if you qualify for the first-time homebuyer credit and if you qualify for the maximum amount of credit, contact the IRS or your tax advisor.
If you are a first-time homebuyer and still on the fence whether to buy this year or not, perhaps this new credit will get you to jump off the fence and dive into homeownership. When you combine the tax credit with historically low interest rates, a great selection of homes, desperate sellers and low home prices, shopping for a home gets exciting.
NOTE: This blog is not meant as tax advice. Please consult your tax advisor for details about your particular situation. We are real estate agents, not tax advisors.
Kerstin G. Brooks
Brooks & Heinze Team
"Where People Come First"
Skyline Properties, Inc.
http://www.propertyinseattle.com/
Email: info@propertyinseattle.com
First-time buyers, for the purpose of this credit, are those who have not owned a home in three years. This new tax credit does not replace the 10% of purchase price, up to $7,500 tax credit passed as part of last year's Housing and Economic Recovery Act of 2008.
So, there are two breaks for first-time homeowners in the tax code now. Which credit you can take depends on when you purchased your home.
If you're a first-time home buyer and you purchased your home on or after April 8, 2008, and by Dec. 31, 2008, you may qualify for 10% of the purchase price, up to $7500 tax credit but you have to pay that back because it's not really a credit, it's more like a 15-year, interest-free loan from the IRS.
Visit the IRS website or consult your tax advisor for the details if you qualify for this credit (loan). The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns.
The full credit is available for homes costing $75,000 or more. Only purchases of a main home located in the United States qualify, and the home must have been purchased after April 8, 2008, and before December 31, 2008. For a home you construct, the purchase date is the date you first occupy the home.
The up to $8,000 tax credit is available for qualifying home purchases made from Jan. 1, 2009, until Dec. 1, 2009 (yes, Dec. 1 not Dec. 31). At least the credit is a true credit and does not need to be repaid, that is, if you don't plan on moving within three years. The home must remain the buyer's "main home" for at least 36 months after the purchase date, which means no selling or renting the home. This won't work for an investment property. If the buyer sells or moves before 3 years have passed, they will need to pay back the credit.
There is also an income limitation and the credit starts phasing out if you have over $75,000 in gross adjusted income for single filers and up to $150,000 in adjusted gross income for joint (married) filers.
A tax credit is much more valuable than a deduction. A credit reduces dollar for dollar the amount of tax you owe. A deduction merely reduces the amount of your income that is taxable.
Please click on the following links to see a side by side comparison of the two tax-credits, repayment requirements, recapture requirements, income limits to qualify, property eligibility, amount of credit, etc.
Tax Credit Chart (Source: National Association of Realtors)
http://www.irs.gov/newsroom/article/0,,id=204671,00.html (IRS.gov Website)
If you are still not sure which and if you qualify for the first-time homebuyer credit and if you qualify for the maximum amount of credit, contact the IRS or your tax advisor.
If you are a first-time homebuyer and still on the fence whether to buy this year or not, perhaps this new credit will get you to jump off the fence and dive into homeownership. When you combine the tax credit with historically low interest rates, a great selection of homes, desperate sellers and low home prices, shopping for a home gets exciting.
NOTE: This blog is not meant as tax advice. Please consult your tax advisor for details about your particular situation. We are real estate agents, not tax advisors.
Kerstin G. Brooks
Brooks & Heinze Team
"Where People Come First"
Skyline Properties, Inc.
http://www.propertyinseattle.com/
Email: info@propertyinseattle.com
Monday, February 16, 2009
Is now really the best time to buy? Yes, no, maybe?
I have put off writing this article for several weeks because I am genuinely devoted to give the best advice I can to my clients. Every buyer I am working with now and almost every buyer who has come through one of my open houses the last several months has asked me if now is the right time to buy and what I think will happen to home values.
There is a lot of information out there about low prices, low rates and tax credits and how people should take advantage of these things. So, let me answer the question of whether it is a good time to buy. Well, not so fast. I wish there was a clear cut answer that was right for everyone. Frankly, there is no blanket answer that applies to all. For many people, now is a fantastic time to buy. Let’s look at what you should consider before you decide if buying now is right for you.
Are prices still falling drastically in your market? Are there a ton of foreclosures in the neighborhoods you are looking to buy in?
If the answer is yes, maybe you should wait. A lot of new foreclosures being filed in an area usually signal that the worst is not over yet and it usually means that prices are going to continue dropping substantially. To find out foreclosure rates in your area, go to
http://www.realtytrac.com/foreclosure/foreclosure-rates.html . Certain parts of California and Nevada have been hard hit and there seems to be no end in sight to prices dropping and foreclosures being filed. If you are thinking about buying in one of these markets, you may want to wait. But talk to your local real estate professional to find out about the unique forces in your area.
Are you looking to “move up”?
“Moving up” means selling a less expensive home and buying a higher priced home. It is true that selling a home is more difficult now then it used to be and you will ‘take a hit’ on the sale. But don’t let that scare you. Just be smart about it. Don’t commit to a new home until you have sold your current home. Then, move to a nicer, bigger home at a terrific, discounted price.
Take a look at rates right now. Rates are almost unbelievably low right now.
Why are they so low? It’s one of the things our government has done to encourage homebuyers to enter the market and allow homeowners with adjustable mortgages to refinance at a lower rate. I don’t necessarily agree that this is the best tool or bail out strategy but that’s a topic for another blog entry.
If prices go down more, higher rates can affect your payment sufficiently as to wipe out any or all of that additional buying power. For more information about how a rise in rates can make buying a home less affordable please read my blog entry entitled http://brooksheinzerealestate.blogspot.com/2008/10/know-how-interest-rates-affect-your.html
More points to consider. Do you want to own a home?
Has it always been your dream to own a home? Do you have a stable job (like Health Care, certain government jobs, etc.), are you worried about inflation (you should be it’s a real thing), do you like to get free money from the government (you get a tax credit from the government when you buy a home now)? Well, then, maybe you should buy a home in 2009.
Obviously, if you are not comfortable with the security of your job, you may want to consider holding off on buying a home. On the other hand, you will have a housing expense whether you are renting or own so you may just want to make sure that you are not overextending yourself and buy a home you can truly afford.
Historically, real estate tends to rise along with prices in the overall economy and can thus provide an effective hedge against inflation. Of course, at the moment home values are dropping not rising. Have you noticed that many other goods are cheaper too now? Have you looked at gas prices, air line tickets, hotel rates, etc.? All are down – seems food is the only commodity that hasn’t dropped. The government is creating money out of thin air by printing more of it. Sooner or later that will result in inflation.
If you haven’t guessed it, I am not sure that some of the things the government is doing to ‘help’ us make a lot of sense, on the other hand, I would not talk a first-time homebuyer out of taking free money. If you plan on buying a home, take advantage of the tax credit the government is offering.
Appreciation is great and it is the one benefit that most homeowners understand. Now that we have depreciation in action, most homeowners forget that there are other advantages to owning a home. Remember that your home is your shelter, it is where you live, where you raise your children and where you create family memories. You have to live somewhere, right? Why not in your home where you can do as you please? Rather than an apartment where someone else dictates the rules. Payments on your home (unless you have one of those dreaded adjustable rate mortgages) are generally fixed. Rents can go up.
Don’t forget about the tax advantages of owning a home – mortgage interest is deductible and reduces your taxable income. I am not a tax advisor, so check with your CPA how your situation is affected by this.
To get back to my initial reason for writing this entry: Should you buy a home now?
Depending on your situation and your goals, now is a great time to buy a home. Whatever happens with the economy, you need to live somewhere and an affordable place is always a good thing.
Work with a real estate agent who truly understands his/her market and cares about you. Work with a mortgage professional who explains all the costs involved in financing a home and who will go over your budget in detail. Buy a home that is affordable to you, don’t overextend yourself. Plan to stay put for a while and enjoy the home you bought for many years to come.
For more information, please contact the Brooks & Heinze Team in Seattle, WA or attend one of their free homebuyer workshops - http://www.propertyinseattle.com/buyerworkshop.htm
Kerstin G. Brooks
Brooks & Heinze Team
“Where People Come First”
Web: www.propertyinseattle.com
Email: info@propertyinseattle.com
There is a lot of information out there about low prices, low rates and tax credits and how people should take advantage of these things. So, let me answer the question of whether it is a good time to buy. Well, not so fast. I wish there was a clear cut answer that was right for everyone. Frankly, there is no blanket answer that applies to all. For many people, now is a fantastic time to buy. Let’s look at what you should consider before you decide if buying now is right for you.
Are prices still falling drastically in your market? Are there a ton of foreclosures in the neighborhoods you are looking to buy in?
If the answer is yes, maybe you should wait. A lot of new foreclosures being filed in an area usually signal that the worst is not over yet and it usually means that prices are going to continue dropping substantially. To find out foreclosure rates in your area, go to
http://www.realtytrac.com/foreclosure/foreclosure-rates.html . Certain parts of California and Nevada have been hard hit and there seems to be no end in sight to prices dropping and foreclosures being filed. If you are thinking about buying in one of these markets, you may want to wait. But talk to your local real estate professional to find out about the unique forces in your area.
Are you looking to “move up”?
“Moving up” means selling a less expensive home and buying a higher priced home. It is true that selling a home is more difficult now then it used to be and you will ‘take a hit’ on the sale. But don’t let that scare you. Just be smart about it. Don’t commit to a new home until you have sold your current home. Then, move to a nicer, bigger home at a terrific, discounted price.
Take a look at rates right now. Rates are almost unbelievably low right now.
Why are they so low? It’s one of the things our government has done to encourage homebuyers to enter the market and allow homeowners with adjustable mortgages to refinance at a lower rate. I don’t necessarily agree that this is the best tool or bail out strategy but that’s a topic for another blog entry.
If prices go down more, higher rates can affect your payment sufficiently as to wipe out any or all of that additional buying power. For more information about how a rise in rates can make buying a home less affordable please read my blog entry entitled http://brooksheinzerealestate.blogspot.com/2008/10/know-how-interest-rates-affect-your.html
More points to consider. Do you want to own a home?
Has it always been your dream to own a home? Do you have a stable job (like Health Care, certain government jobs, etc.), are you worried about inflation (you should be it’s a real thing), do you like to get free money from the government (you get a tax credit from the government when you buy a home now)? Well, then, maybe you should buy a home in 2009.
Obviously, if you are not comfortable with the security of your job, you may want to consider holding off on buying a home. On the other hand, you will have a housing expense whether you are renting or own so you may just want to make sure that you are not overextending yourself and buy a home you can truly afford.
Historically, real estate tends to rise along with prices in the overall economy and can thus provide an effective hedge against inflation. Of course, at the moment home values are dropping not rising. Have you noticed that many other goods are cheaper too now? Have you looked at gas prices, air line tickets, hotel rates, etc.? All are down – seems food is the only commodity that hasn’t dropped. The government is creating money out of thin air by printing more of it. Sooner or later that will result in inflation.
If you haven’t guessed it, I am not sure that some of the things the government is doing to ‘help’ us make a lot of sense, on the other hand, I would not talk a first-time homebuyer out of taking free money. If you plan on buying a home, take advantage of the tax credit the government is offering.
Appreciation is great and it is the one benefit that most homeowners understand. Now that we have depreciation in action, most homeowners forget that there are other advantages to owning a home. Remember that your home is your shelter, it is where you live, where you raise your children and where you create family memories. You have to live somewhere, right? Why not in your home where you can do as you please? Rather than an apartment where someone else dictates the rules. Payments on your home (unless you have one of those dreaded adjustable rate mortgages) are generally fixed. Rents can go up.
Don’t forget about the tax advantages of owning a home – mortgage interest is deductible and reduces your taxable income. I am not a tax advisor, so check with your CPA how your situation is affected by this.
To get back to my initial reason for writing this entry: Should you buy a home now?
Depending on your situation and your goals, now is a great time to buy a home. Whatever happens with the economy, you need to live somewhere and an affordable place is always a good thing.
Work with a real estate agent who truly understands his/her market and cares about you. Work with a mortgage professional who explains all the costs involved in financing a home and who will go over your budget in detail. Buy a home that is affordable to you, don’t overextend yourself. Plan to stay put for a while and enjoy the home you bought for many years to come.
For more information, please contact the Brooks & Heinze Team in Seattle, WA or attend one of their free homebuyer workshops - http://www.propertyinseattle.com/buyerworkshop.htm
Kerstin G. Brooks
Brooks & Heinze Team
“Where People Come First”
Web: www.propertyinseattle.com
Email: info@propertyinseattle.com
Thursday, October 30, 2008
Your buying opportunities are endless !
Buy now - don't wait.
A lot of buyers are saying they want to buy but they are waiting until prices hit rock bottom. First, it is really hard to tell when the market has hit bottom. It does not matter if we are talking about gold, stocks or homes here. Trying to time the bottom is almost impossible.
Is it likely that prices will go down further? Yes, it is is. In fact, I do not believe that we have seen the bottom yet. However, I do not forsee any more drastic drops.
You should buy now because prices are low and financing rates are low. It is important to keep in mind that purchase price alone does not determine the cost of investment but the combination of purchase price and mortgage interest rate determine the true cost. For a more detailed explanation and some compelling examples take a look at my blog entry from Oct. 22, 2008.
If you are a cash buyer, feel free to wait what you perceive to be the bottom of the market. However, if you are like most buyers who need to get a loan to finance a home purchase, don't wait to buy. Interest rates are great at the moment but everyone in the lending industry I have talked to says they will soon go up. Higher rates will affect your buying power or may even make it impossible for you to qualify alltogether. Just talk to some of your relatives or friends who bought in the eighties - the rate was 17.48% in January of 1982 (source Freddie Mac homepage). Now rates are going to jump that high overnight or perhaps ever again but I just wanted to make the point that you need to look at the cost of financing, as well as the purchase price.
Just for fun, take a look at the mortgage rate changes between 1971 - 2008.
So, don't delay. Buy today. We would be happy to help you take advantage of this great buyer's market. The opportunities are amazing.
Kerstin G. Brooks, ABR, Realtor
Brooks & Heinze Team at Skyline Properties, Inc.
Cell: 206.276.5827
Email: kerstinbrooks@earthlink.net
Web: www. propertyinseattle.com
A lot of buyers are saying they want to buy but they are waiting until prices hit rock bottom. First, it is really hard to tell when the market has hit bottom. It does not matter if we are talking about gold, stocks or homes here. Trying to time the bottom is almost impossible.
Is it likely that prices will go down further? Yes, it is is. In fact, I do not believe that we have seen the bottom yet. However, I do not forsee any more drastic drops.
You should buy now because prices are low and financing rates are low. It is important to keep in mind that purchase price alone does not determine the cost of investment but the combination of purchase price and mortgage interest rate determine the true cost. For a more detailed explanation and some compelling examples take a look at my blog entry from Oct. 22, 2008.
If you are a cash buyer, feel free to wait what you perceive to be the bottom of the market. However, if you are like most buyers who need to get a loan to finance a home purchase, don't wait to buy. Interest rates are great at the moment but everyone in the lending industry I have talked to says they will soon go up. Higher rates will affect your buying power or may even make it impossible for you to qualify alltogether. Just talk to some of your relatives or friends who bought in the eighties - the rate was 17.48% in January of 1982 (source Freddie Mac homepage). Now rates are going to jump that high overnight or perhaps ever again but I just wanted to make the point that you need to look at the cost of financing, as well as the purchase price.
Just for fun, take a look at the mortgage rate changes between 1971 - 2008.
So, don't delay. Buy today. We would be happy to help you take advantage of this great buyer's market. The opportunities are amazing.
Kerstin G. Brooks, ABR, Realtor
Brooks & Heinze Team at Skyline Properties, Inc.
Cell: 206.276.5827
Email: kerstinbrooks@earthlink.net
Web: www. propertyinseattle.com
Saturday, October 25, 2008
Should I sell my house now? When does it make sense to sell in a down real estate market?
If you're thinking of moving up in a down real estate market it can make a lot of sense to sell rather than wait. There is never a better time to make a move up in real estate than when the market as a whole is down. Yes, you will probably not come out as well with the sale of your current home, but you will more than make up for it when it comes to buying your new home.
Let's look at an example:
- Assume you own a $300,000 house and you're ready for a $500,000 house. If the market is down 5% then unfortunately your current house is really only worth about $285,000 .
- Assuming that $500,000 house is also down 5%, then you're buying that house for $475,000! You accept a $15,000 loss when you sell, but you make $25,000 when you buy!
But it gets better, every market has a "hot price range" and a "cooler price range" - or put differently, some price ranges are selling better than others.
If you are selling in a "hot price range" (in Seattle that is single family homes under $350k) and are buying in the "cooler" price ranges / higher price range (in Seattle that's $500k+) you can take advantage of a great deal and moving up in this down market can work well for you.
If you are ready to take advantage of this down market to move up and get a great deal, contact us today.
Kerstin G. Brooks, ABR, Realtor
Brooks & Heinze Team at Remax Northwest
www.propertyinseattle.com
Let's look at an example:
- Assume you own a $300,000 house and you're ready for a $500,000 house. If the market is down 5% then unfortunately your current house is really only worth about $285,000 .
- Assuming that $500,000 house is also down 5%, then you're buying that house for $475,000! You accept a $15,000 loss when you sell, but you make $25,000 when you buy!
But it gets better, every market has a "hot price range" and a "cooler price range" - or put differently, some price ranges are selling better than others.
If you are selling in a "hot price range" (in Seattle that is single family homes under $350k) and are buying in the "cooler" price ranges / higher price range (in Seattle that's $500k+) you can take advantage of a great deal and moving up in this down market can work well for you.
If you are ready to take advantage of this down market to move up and get a great deal, contact us today.
Kerstin G. Brooks, ABR, Realtor
Brooks & Heinze Team at Remax Northwest
www.propertyinseattle.com
Wednesday, October 22, 2008
Know how interest rates affect your buying power and payments
Know how interest rates affect your payment. The interest rate on a loan is used to calculate your monthly payment. The higher the interest rate, the higher your monthly payment. The lower the interest rate, the lower your monthly payment. Simple? Yes, but abstract until you see it applied to your loan.
When interest rates rise, it lessens the buying power of potential buyers because it increases monthly payments which are used to decide how much money the lender will let the buyer borrow.
Following is an example to illustrate how your buying power is reduced or how your monthly payments are affected as rates change: At a 6% fixed rate, with 30 years of payments, one would have to pay approximately $600.00/month for every $100,000 borrowed. At a 7% rate, one would have to pay about $665.00/month on every $100,000 borrowed. So, in this example, for a $350,000 home your monthly payment would increase by $227.50)/month (from $2100/month to $2327.50) if the interest rate rose 1%.
Home Price Interest Rate Monthly Payment
$300,000.00 6% $2,100.00
$300,000.00 7% $2327.50
Let’s do a second example. At a 6% fixed rate, with 30 years of payments, your monthly payments for a $500,000 would be $3000/month and at a rate of 7% would be $3325 (a $325/month increase in payments).
Home Price Interest Rate Monthly Payments
$500,000.00 6% $3,000.00
$500,000.00 7% $3,325.00
Obviously, an increase in rates can have several negative affects on the market. With less buying power, buyers may find that they can no longer afford now what they could have afforded a couple of months ago. This can decrease the number of financially qualified buyers. Less buyers in the market equals less demand for homes, causing a downward pressure on prices in some of our local Seattle communities. You may wonder than if you should wait until prices drop before you buy - the answer is no (see example below).
Let's look at it from a slightly different perspective why waiting for prices to drop is the wrong approach. Example: You decide to wait to buy your home until prices drop 10% percent. The risk in waiting could be higher interest rates and higher mortgage payments as seen in the example above. So if the price of a home happens to drop ten percent from $500,000 to $450,000, but interest rates rise 1% point from 6% to 7%, your payments are still about $3000 a month. Only a $7.50 change in monthly payments.
Home Price Interest Rate Monthly Payments
$500,000.00 6% $3,000.00
$450,000.00 7% $2,992.50 (-$7.50)
One more tidbit of caution. When rates rise, they usually rise fast (much faster than the change of appreciation).
Disclaimer: The above rates I used are not actual rates here in Seattle — they’re just used as an example to show the effect of rate changes on monthly payments. Rates do vary depending on your credit score, how much you are borrowing, and market conditions. Please consult a mortgage professional to get a better idea of what your monthly payments would be and to see what you can afford. We would be happy to refer you to our team lender for further information.
If you have more questions, about this topic, please feel free to contact us at 206.276.5827 or at kerstinbrooks@earthlink.net.
For the folks who prefer this information in a visual/audio format, please watch a brief video summary about this on YouTube.
Kerstin G. Brooks, ABR, Realtor
Brooks & Heinze Team at RE/MAX NW Realtors
http://www.propertyinseattle.com/
Phone: 206.276.5827
Email: kerstinbrooks@earthlink.net
When interest rates rise, it lessens the buying power of potential buyers because it increases monthly payments which are used to decide how much money the lender will let the buyer borrow.
Following is an example to illustrate how your buying power is reduced or how your monthly payments are affected as rates change: At a 6% fixed rate, with 30 years of payments, one would have to pay approximately $600.00/month for every $100,000 borrowed. At a 7% rate, one would have to pay about $665.00/month on every $100,000 borrowed. So, in this example, for a $350,000 home your monthly payment would increase by $227.50)/month (from $2100/month to $2327.50) if the interest rate rose 1%.
Home Price Interest Rate Monthly Payment
$300,000.00 6% $2,100.00
$300,000.00 7% $2327.50
Let’s do a second example. At a 6% fixed rate, with 30 years of payments, your monthly payments for a $500,000 would be $3000/month and at a rate of 7% would be $3325 (a $325/month increase in payments).
Home Price Interest Rate Monthly Payments
$500,000.00 6% $3,000.00
$500,000.00 7% $3,325.00
Obviously, an increase in rates can have several negative affects on the market. With less buying power, buyers may find that they can no longer afford now what they could have afforded a couple of months ago. This can decrease the number of financially qualified buyers. Less buyers in the market equals less demand for homes, causing a downward pressure on prices in some of our local Seattle communities. You may wonder than if you should wait until prices drop before you buy - the answer is no (see example below).
Let's look at it from a slightly different perspective why waiting for prices to drop is the wrong approach. Example: You decide to wait to buy your home until prices drop 10% percent. The risk in waiting could be higher interest rates and higher mortgage payments as seen in the example above. So if the price of a home happens to drop ten percent from $500,000 to $450,000, but interest rates rise 1% point from 6% to 7%, your payments are still about $3000 a month. Only a $7.50 change in monthly payments.
Home Price Interest Rate Monthly Payments
$500,000.00 6% $3,000.00
$450,000.00 7% $2,992.50 (-$7.50)
One more tidbit of caution. When rates rise, they usually rise fast (much faster than the change of appreciation).
Disclaimer: The above rates I used are not actual rates here in Seattle — they’re just used as an example to show the effect of rate changes on monthly payments. Rates do vary depending on your credit score, how much you are borrowing, and market conditions. Please consult a mortgage professional to get a better idea of what your monthly payments would be and to see what you can afford. We would be happy to refer you to our team lender for further information.
If you have more questions, about this topic, please feel free to contact us at 206.276.5827 or at kerstinbrooks@earthlink.net.
For the folks who prefer this information in a visual/audio format, please watch a brief video summary about this on YouTube.
Kerstin G. Brooks, ABR, Realtor
Brooks & Heinze Team at RE/MAX NW Realtors
http://www.propertyinseattle.com/
Phone: 206.276.5827
Email: kerstinbrooks@earthlink.net
Subscribe to:
Posts (Atom)
Posts
