One Percent Gets You Five
By Charles TurnerDo interest rates matter? For quite a few years now we’ve all been hearing that “rates are at historic lows and will only go up.” It was true then and it seems to be true now and the statement fuels the “Buy Now” debate. I think we are better served by educating and giving the tools for the individual to make an informed decision. Rates have bounced around but most would say that 6% is a really high rate.
Assuming all other things being equal, the difference between a loan at 5% and a loan at 6% is 5.23% over seven years (the payment difference is $62.73/month/$100,ooo borrowed). Why seven years? That’s the average time of ownership of a home according to NAR. That means in seven years on a $300,000 mortgage the 5% loan has saved over $15,000 in interest expense.
I used this Lendingtree calculator for my figures.
Granted this is national data and it would be interesting to see the Portland numbers. This would be good news for buyers as there are obviously less of them competing for the growing number of listings. This would also put more pressure on asking prices. Time will tell but I think this is gonna be a very interesting summer for Portland.
Home Buyer Credit Expiration Sinks Mortgage Applications by 27%
http://www.theatlantic.com/business/archive/2010/05/home-buyer-credit-expiration-sinks-mortgage-applications-by-27/56962/
Very intriguing…I never knew that average home ownership is 7 years.
Any idea what the average closing costs are?
I wonder how that 7 year average wil be affected by this bubble. There was a lot of flipping and a lot of risky loans that came home to roost. But on the other end there are lots of folks waiting for better times to sell which might delay a move. But I can’t help but think about many of my relatives that have been in their homes for 20, even 30 plus years…
Straight from the NAR Profile of Home Buyers and Sellers 2009:
Interesting. I’ve been hearing ‘seven years’ each time I hear the question posed. You’d think it would be different given the events of the past 10 years. What data points does NAR use? Mortgages? If so, wouldn’t refi’s skew the data?
Can’t speak to NAR’s methods but I doubt mortgages, and therefore refi’s, factor into it as that would dump cash buyers from the equation.
Do you think the that maybe those that would have sold and didn’t because they didn’t have to balanced out those had to sell and presumably had a shorter period of ownership?
That would be a heck of a lot of people holding on till better times. Just think about all the foreclosures…(gasp)…in places like Florida, California and Nevada. Another factor: is there a way to distinguish between primary residence and those flipping for the quick buck?