|
Buyer’s Market, Seller’s Market and Opportunity
Is now the right time to buy or sell a piece of property?
By David MacPartland
No. Maybe? Yes! Every individual is unique with there own set of circumstances, values, wants, and needs. Just the same, every piece of property is unique as to its characteristics, such as location, location, location, topography, and history to name a few. There is also the factor of availability of the property itself. These factors make the Real Estate Market a local market, and it is best to have the representation of a professional to help when considering these factors in a purchase or sale.
Economic factors also play an important role in the making of a sound decision. Recently, there has been much discussion over the market being a buyer’s or a seller’s market and the direction of price of that market. Another factor effecting a decision is financial. What type of financing is available? What is the interest rate of that financing?
Here is a table to demonstrate the effects of that interest rate and its effect will have on a buyer’s purchasing power. This chart makes the following assumptions $ 60,000 down payment and a desired payment about $1500/ month not including escrow for taxes, insurance.
Interest Rate Chart
Interest Rate Payment Purchase price Down Payment Amount Financed Difference
6.00% $1438.92 $300,000 $60,000 $240,000 $0
7.00% $1438.91 $276,279 $60,000 $216,279 $23,721
7.50% $1438.91 $265790 $60,000 $265,790 $34,210
The next chart shows the difference in equity in 5 years (60 months) on the above loans and capital appreciation
5 Year Equity chart
Rate Purchase Price Amount Financed 60 - month Balance 10%Appreciation 0% Appreciation 10% Depreciation
Value Equity Value Equity Value Equity
6.00% $300,000 $240,000 $223330 $330,000 $106670 $300,000 $76,670 $270,000 $46,670
7.00% $276,279 $216,279 $203586 $303906 $100,320 $276,279 $72,693 $248,651 $45,065
7.50% $265,790 $205,790 $194,713 $292,369 $97,656 $265,790 $71,077 $239,211 $44,498
Waiting for a buyer’s market to hit bottom might not be the most prudent financial decision. Interest rates are very low currently, and they will go up. They might price someone out of the best opportunity for the greatest asset appreciation.
Rent Chart
Rent Per Month 6 Months 12 Months 3Years 5Years
$1438.92 $8,633.52 $17,267.04 $51,801.12 $86,335.20
$1500 $9,000.00 $18,000.00 $54,000.00 $90,000.00
$1600 $9,600.00 $19,200.00 $57,600.00 $96,000.00
While often it is prudent to rent when first moving to a new area. The best way to develop equity is to get into a residence of your own at as low of an interest rate as is possible. Waiting for a bottom of a market could potentially be costly if you end up paying a higher interest rate. Later we will talk about things one can do to improve a credit score thus reducing the interest rate you get on the purchase of real estate.
|
