Many potential home buyers are finding it difficult to filter out the media headlines and determine if now is the right time to buy a home. Most industry professionals agree buyers shouldn’t wait until prices and interest rates go up to buy -- now is the best time to buy a home.
Home prices in northern Nevada have dropped dramatically in the past few years and today’s mortgage interest rates are among the lowest in history. They’ve recently dipped again and borrowers can find a 30-year fixed loan for as low as 4.25percent. Rates were as high as 6.75 percent just a few years ago and in the double-digits 20 years ago.
As the economy rebounds the demands for mortgages will rise and so will interest rates. The effect of a rise in interest rates on monthly mortgage payments can be dramatic.
Based on the current median home sales price of $175,000, a 30-year fixed rate mortgage with a 4.25% interest rate has a monthly payment of $933 per month. At six percent the monthly payments increase to $1122 -- an increase of $189 a month. The total payments over the life of the loan increase by a whopping $68,040!
Home buyers that believe home prices will drop further could be making a very costly mistake. If the interest rates increase to six percent again, the home price would have to drop below $147,000 -- more than 16 percent -- to maintain the same monthly payments. House prices have begun to stabilize and bidding has become highly competitive, especially on the lower priced homes. It is highly unlikely that prices will drop that much.
Potential buyers frequently overlook the tax advantages of homeownership when considering if they should purchase a home. Mortgage interest and property taxes are great tax deductions.
While there are many variables to tax advantages, we estimate that a $175,000 mortgage with a 4.25 percent interest rate will generate $1,624 reduction in your tax liability annually.
This is the first time in four or five years that home prices and low interest rates have made northern Nevada an affordable place to live for most families. A family with a median income can afford to buy a median price home.
Low mortgage rates and affordable home prices will not last forever. The longer you wait the more you will have to pay to achieve your dream of homeownership!
Northern Nevada has many highly qualified Realtors, loan officers and builders that can be great help during your home shopping experience. To find more resources, contact the Builders Association of Northern Nevada at (775) 329-4611 or visit www.thebuilders.com.
