You Are Still Missing The Double Whammy

You Are Still Missing The Double Whammy

It’s been a well-known seller’s market for some time now in Denver. Even builders have buyers over a barrel since there is so little re-sale inventory. This is much to the dismay of many buyers in the market.

I have heard this many times before from buyers, “Dan, I feel like I am buying at the top of the market.” Maybe it’s not quite yet the top of the market, but certainly soon. It is true that home prices are higher now than back at the peak in 2006. If your plan is to wait until home prices come down, I don’t think that’s going to happen anytime soon. I do think that home prices will slow down from their meteoric rise. It’s not feasible to sustain a 10% gain in home appreciation year after year. Homebuilders will continue to pump massive amounts of inventory into the market in the next 12 to 18 months. With that said, home prices will stabilize – if not level off, and we will be back at a more stable market. I think that’s still 12 months off.

I know some people can’t wait for 12 months when they need to buy a home right now, and they get worried for paying top dollar.  My advice for them is the following: “Yes, you are paying top dollar, but at least you are not paying 6, 7 or 8 percent interest rates as well.” That’s what we call the double whammy when someone pays top dollar for the home and pays a high interest rate. That’s the worst-case scenario for buyers and right now interest rates are low, so you are avoiding the double whammy. Remember, you may not like paying 10, 20, 30 thousand dollars or more for a house that you could have bought one, two, or three years ago, but the interest rate always is a bigger financial hit than the price of the home. For example, a general rule is your monthly mortgage goes up by about 50-60 dollars a month per 10,000. A home that costs you $20K more this year than last is only costing you 120 dollars more a month. However, a jump of a full point or more interest rate will cost you 200-300 dollars more a month in your payment. This is why I tell people to always watch the interest rates and don’t get too concerned about home values.

Right now, homes are still unbelievably affordable given the low 30-year fixed rates that have been hovering between 4 and 4.5 percent. Remember to watch interest rates, not home prices, avoid the double whammy, and buy the home you always dreamed of.

Dan Polimino is a Broker/Owner with the Colorado Dream House Team, Keller Williams Realty DTC. Contact Dan at 303-522-1161, dan@coloradodreamhouse.com, codreamhouse.com or coloradodreamhouse.com

 

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