If Your Goal Is to Buy Low, Buy Now!
Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.
For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).
Your principle and interest payment would now be $1,067.54.
By waiting to pay less for the PRICE of the house, the COST increased $93 a month. That adds up to $1,116 a year and over $33,000 over the life of the loan.