Culver City Observer -

By Mike King 

Home Mortgage Interest Rates Set to Rise?


February 27, 2014

Since time immemorial, the conundrum for potential homebuyers, is WHEN to buy. Culver City real estate prices have risen significantly in the last two years. Single-family home prices have already exceeded their prior high in 2007, and I predict that 2014 will be the year that the condominium market in Culver City will break new highs. How will a rise in home mortgage interest rates effect buyers potential purchasing power?

Given that there appears to be no signs in the general economy of significant change in circumstances, then conventional wisdom seems to be the Federal Reserve will continue to taper the bond buy back program (quantitative easing). Then it would be reasonable to suggest that this time next year, not only will prices be higher, but so will interest rates.

As you can see from this chart, with only a 1% change in home mortgage interest rates, the actual purchasing power is reduced by a massive 11%, considering all of this, the savvy home buyer with nothing else holding them back can save themselves a fortune in future mortgage payments and be able to buy more home now!

Buyers are sometimes hesitant to pull the trigger on a home because it's not quite what they are looking for. I have witnessed buyers pass over homes in great neighborhoods because the property didn't offer 95% of what they wanted, only 80%. In a market with very little inventory I've seen buyers still looking for two years or more.

In most cases it's better to be on the ladder than still waiting to jump on for the perfect home. Anyone who bought a home 2 years ago is now sitting on 20% equity and secured a home loan below 4%.

Making a decision to buy a home can be a daunting one, especially for first time buyers. However, being paralyzed to make a decision in this type of market can be far costlier than not making one at all.


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