Is this a good time to buy a home?

After I posted  the news that the mortgage rates dropped to a record low, potential home buyers started asking me whether I think it’s a good time to buy. The biggest concern I heard was: what if home prices drop even further?

Well, if you’re planning to buy and sell the next year with a profit, it would be challenging. However, if you’re willing to look long term, let’s see.

While most experts agree that home prices in Snohomish county may decrease another 5-10%, we are enjoying the lowest ever mortgage rates! It is unlikely that those will stay… When the economy starts recovering, the rates inevitably will edge higher.

Now, let’s imagine this:

Current median sales price in Snohomish county is about $300,000 (may be it’s a bit on a higher end but I’ll round it). If you buy this home now with 20% down and 4.5% interest rate, your monthly payment (principal and interest) on 30 year fixed loan would be $1216.04

Now, let’s say the prices will go down another 10% but interest rates jump to 6.5% (this is what it was about 2 years ago). Now, if you buy the same house, your monthly payment would be $1365.26.  At 6% rate, the payment would be $1295.02. Even with 5.5% interest rate your monthly payment will still be higher $1226.42.

You can do your own math with different scenarios (you  are welcome to use my mortgage calculator or any other) but roughly for every 1% increase in mortgage rates, the house you can afford will have to be at least 10% cheaper.

Serhiy Onyshchuk, realtor in Snohomish county, WA.