January 25, 2008
Much Ado About Nothing…..Homes Prices drop by 1.8 % in 2007
That’s Chicken Little and it’s not someone you want to be. Did you hear the NEWS. Home prices were off 1.8 % in 2007. OMG, the sky is falling. It was the first time that home prices ever fell in 40 years of tracking this information. Let’s see the DJIA can swing that much in a day. When the DJIA trades lower by 10 %, 20 %, and more, it is simply called a CORRECTION. Guess what? The housing marketing is experiencing a correction. Gasp, horror, say it ain’t so, Joe.
For the vast majority of Richmond homeowners who have owned their homes for a few years, your appreciation has been incredible, so what would be the big deal about giving back 2 % of that gain? Okay, Brick, we might be able to accept that. Good, I am glad to hear that, but remember I told you earlier this month that the average price in Richmond for 2007 was up 5.1 %. Averages are comprised of lots of numbers and ours just happens to be good. All real estate like politics is local.
Now go out and enjoy your day.
Jamie Lee Chafin said,
January 26, 2008 @ 9:38 am
As usual…..Great observations and facts coming from Brick!
Historically, with respect to mortgage rates and home prices…the general rule has been the higher the average price of homes the lower the rates have been. Conversely, the lower the price of homes, the higher the rates have been.
We can now throw that theory out with the bath water!
Let’s use the average price of homes from the MLS here in Richmond for 2007. I captured this number from one of Brick’s previous blogs.
2007 Avg. Price = $ 338,233. Now assume a 90% LTV ( loan to value ) which equals a loan amount of $ 304,409.
The average rate for 2007 for a 30 yr fixed rate mortgage with an ltv of 90% was 6.5%. That equates to a p & I (principal and interest) payment of $ 1924 per month.
The current rate for a 30 year fixed with the above parameters is 5.5%. That equals a payment of $1,728. ( p & i ) !
A huge $ 200 per month savings! Imagine the possibilities!
Another way to look at it…..assume you are comfortable with the payment for P & I of $ 1924 per month and doing some “backward” math…try this on.
At the rate of 5.5%, $1,924 will amortize a loan amount of $ 339, 000 over 30 years. If this represents a 90% LTV, then the purchase price would be $ 376,667. So, for adding the small sum of $ 3,844 to your downpayment ( from above example), you can buy a home roughly $ 40,000 more than you could in 2007!
Here’s the point to all of this…….
There has never been a better time to buy in the Richmond area than right now!
Great Values, Great Rates, Great Inventory!
And, similar to the stock market, you can never time the bottom or the top of the cycle to any market. You buy or sell because it makes sense for your set of circumstances.
Right now….it makes dollars and “cents”. Think about it.