Is it a good time to buy a home?
There are thousands of home buyers sitting on the side lines trying to time the very bottom of the housing market, wondering when the time to buy may be. The time to buy may have already passed many of these individuals by. The opportunity to purchase a home at the very rock bottom of prices may be overshadowed by the offset of higher mortgage interest rates. The month of June has seen mortgage rates increase by over 1/2 of a percent on most loan programs. This rapid increase is equivalent to about 10k in price negotiation on a 200k mortgage when assesing a home purchase. The half of a point increase raises a borrowers payments by approximately $60 per month for the entire loan term.
Home buyers who are contemplating purchasing and still need motivation should look towards the stock market and comments regarding inflation and the fed funds rate for further motivation to move forward. Many economists now believe that the Fed will be forced to raise the fed funds rate in the fall of 2008 to help stem the rapid rise of inflation, primarily caused by the rapid increase of oi prices. Mortgage rates are not likely to decrease should inflation keep rising as sharply as it has in the past two months. For every 1/2 percent that mortgage rates move up on a 200k loan, it affects the borrowers net buying power by about 10k. Meaning, they are now paying the same payment on 190k as they would have had at 200k due to the higher interest rate.