Low interest rates – time for action?

[Continuing the reader contributed series “Cornering the Market,” written by Brian Murray]

Can You Afford Not to Buy Or Sell Today?

OK fellow Hobokenites, here it is in black and white. The spring market has a week left and the government is begging you to prop up the economy through the sale and purchase of housing. How? Unwittingly through the interest rates. Practically 50 year lows. That’s FIVE ZERO. I wonder what you could have bought a brownstone for back in 1961? Add on top the 4.5% interest rate and you could make money with a squatter!

The facts: Buyers live in the payment – Sellers live in the price

For buyers, a 1% increase in interest rates takes your purchasing power down about 10%. So you can listen to the pundits talk about a double dip housing recession or you can look at Toll Brothers cranking up 156 condos at 1450 Washington (http://www.hobokenhomefinder.com/1450-washington-at-hudson-tea.aspx) Here is a simple question for you..and don’t cheat….What is more likely to happen in the next 12 to 24 months… A) Prices in Hoboken will plunge another 10% on top of the 20% drop we’ve seen from the peak or B) Interest rates will rise a point or more from historical lows amid serious inflationary pressures? …to the buyer it’s the same monthly payment. Choice A is a gamble that I am not willing to make. Choice B. Let’s just say I am a big proponent of rate lock.

The Truth For Sellers:

So you are thinking of selling your Hoboken condo but missed the spring market. Maybe your worried that all the good buyers are off sunning themselves until Labor Day. A question for you? What happens when those interest rates tick up? Two very important things. 1. On the fence buyers will rush in not to miss their chance and you won’t be on the market. oops. 2. Those $500k buyers with diminished purchasing power are now $450k buyers. Does a seller really think the buyer is going to blame themselves and settle for one less bath? More likely will they negotiate harder with the seller and put downward pressure on prices. Probably not the whole 10% but even halfway costs the seller my commission.

Still Confused? Watch the video….

More Brian Murray

Visit Brian Murray at hobokenhomefinder.com for weekly market updates, the latest stats, and open house directories.

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