OK, so here we are…early 2018. The markets are starting a roller coaster ride of uncertainty, the fed has reversed monetary policy and started pulling liquidity out of the market, and interest rates are on an upward trend.
On top of rising interest rates, prices (historically speaking) are high. Demand is high. Inventory is low. In fact, in the 4 counties making up “metro Detroit” our inventory levels (# of homes on the market) is down 87% from January 2008. This means in January of 2008 there were 112,125 total homes on the market. In January of 2018, there were 14,060. 14,060 may sound like a lot, but if you look at the size of the 4 counties that’s virtually nothing.
If the fed continues quantitative tightening (QT) pulling the amount of money (liquidity) out of the market, prices will stabilize in correlation with rising interest rates. Good for prices, bad for monthly payments and affordability due to higher monthly payment obligations.
The fed will halt QT if asset prices are negatively affected; interest rates will rise anyway to control inflation – and due to high demand and rising materials prices – prices will continue an upward trend regardless of a slight bump in rates. This means more expensive homes and higher monthly payments.
What you should consider:
Think about this. Say you buy a $500,000 home. You put 20% down and borrow $400,000. On a 30 year term at 4.5% your principle and interest payment is $2,027. A mere 1/8 of a percentage point (or .125%) rise in rates will cost you another $30/mo. or $10,800 over the life of the loan. How about a 1/4 point (.25%)? That will cost you another $60/mo. or $21,600 over 30 years. Amazing. When someone says waiting will cost you money they ain’t lying.
At the end of the day there are still good values in any market. We can help you find them. Reach out to the New Home Experts® today – the only Realtors in metro Detroit that specialize in new construction homes!
Lou Bitove & Jeff Bortnick, owners of The New Home Experts®, have more than 30 years combined experience in real estate, much of that with builders like Pulte & Toll Brothers. They also provide market research for area builders, developers and national firms. If you’re considering a new home, remember: the builders rep represents the builder, not you. Work with the only local agents in Metro Detroit to specialize in new homes, and save money in the process – ask us how!