The Cost of Waiting

The Cost of Waiting

I recently came across this graph below and thought it might be worth sharing with anyone who has thought of buying a home or re-financing their current home.

Obviously, the prices used in this graph are low for San Mateo, Santa Clara, and San Francisco Counties. However, it’s not the notes we need to worry about here, just listen to the music to understand the general ideas trying to be conveyed.

An other point that isn’t on the graph, which I think is more important for both home-buyers and home-owners are the “principle reduction factors”.  As you may know, when you pay your monthly loan payment part of it goes to cut principle and the other part goes to pay the interest on your loan.

A loan with an interest rate of 3.5% over 30 years on a fixed rate, about 35% goes towards principle the very first month, while at 7%, (which is where the Wall Street Journal predicts interest rates for homes will be by the end of 2014), about 12.3% goes to principle reduction the very first month. This is a huge difference on your money being paid out of your pocket!

You may think it is better to sit on the side lines now because the market is so crazy. You can do that if you wish, it’s OK. However, if you believe what the people in the know are predicting about the future of interest rates for home loans than now is the time for action not tomorrow. Your actions will save you time and money.

I haven’t even addressed the 14% appreciation that is predicted for Silicon Valley real estate by the end of June, 2014 by Zillow.com. We have seen local prices going up on a month by month basis throughout 2013.

Additionally, there’s an expected 3-5 years of up real estate prices being touted by several real estate experts. The Wall Street Journal has written several articles and they don’t see an indication of a let up in prices either. There are several reasons for this increased demand, and it’s not because of our great climate, our enlighten culture, or our World Champion athletes.

The main reason is employment opportunities aka jobs. Did you know of all the job created and filled in the United States in August, 2013 that 17.22% of them are filled right here in the San Francisco Bay Area? That’s almost a quarter of all jobs created!

Folks we are a major metropolitan area holding up this Country with our job opportunities!  Now I understand why we’re seeing more traffic lately.  Why rents are higher.  Why home prices are on an upward trend. Why we have to wait longer for a table at our favorite restaurant. It’s because the jobs are here and jobs bring more people creating more demand for housing, goods, and services.

What does this mean to you in the months ahead? Well if you wait longer you will pay more money for your home and higher interest rates for your home loan. It is time for action on your part, based on empirical knowledge that you now have at your disposal. You will enjoy the benefits in turn saving you time and money if you heed their words.

On the other hand if you are trying to refinance your home NOW is the time. The 3.5% money they were “giving away” for the past few years it is GONE! You can still get “lower than normal” money, but this newer “cheaper” money is not expected to stay around longer either. The next layers of home loans are going to be in the 7%+ range, which historically is normal for home loans.

It’s time for the waiting to stop and the action to start. One thing great about real estate it is an ever-changing entity and anyone can take advantage of it just by listening to it. Please stop and listen to the music if you are thinking about a new home loan. The Cost of Waiting will not be pretty.

As always, Cliff Keith and Team are here to aid you with any of your real estate needs. Call/Text/Email us, we are here to help you. Thank you. Your friend, Cliff