Real Estate NewsBuy An Interest Rate and Get A House, too!
Under "normal" circumstances, a consumer"s decision concerning what type
of home to buy, and when to buy it, is based primarily upon the
individual"s personal needs and preferences. During certain time periods,
however, outside influences take over and occupy center stage.
In times of low interest rates, for example, many more consumers suddenly
enter the marketplace as potential home buyers. Out there, right now, are
buyers whose principal motivation for purchasing real estate in today"s
market is the interest rate, not a particular property.
It doesn"t take a rocket scientist to figure out why. Lower rates equate to
lower monthly mortgage payments. Lower rates allow more people to qualify
for loans. Lower rates provide a window of opportunity for home-buying
which, for many, will slam shut again, once rates escalate. It comes as
no surprise, then, that this particular group of buyers has come out of
the woodwork and is earnestly shopping for properties. They are known in
the real estate industry as "Highly Motivated Buyers".
Besides low interest rates, the real estate market has been driven by other
influences in the past. More than once, consumers have proven that, given
the choice between their emotions and their pocketbook, they will opt for
the savings.
If this sounds confusing, examine the following scenario. Imagine two
identical houses, side by side. They contain the same floor plan, the same
lot size, and are offered for sale at the same price.
House A, in great condition, is described in the ads with words like this:
"Cream Puff!"
"Mrs. Clean Lives Here!"
"Move-In Condition.
"Picture Perfect."
House B, cluttered and dirty, is described like this:
"Needs Some Work."
"Needs a Little TLC."
"Has Great Potential"
Under "normal" conditions, House B doesn"t stand a prayer of selling first.
However, here are two instances where House B was seen by many to be more
attractive than House A.
1981 saw the average 30-year fixed rate at a staggering 18.45 percent.
During this period, buyers were looking primarily for "assumable" mortgages
(low rate mortgages already in place that could be taken over by the
buyer). So, during that time frame, if Dirty House B had the assumable
mortgage, and Immaculate House A was subject to the prevailing "nose-bleed"
high rates, guess which home was more in demand?
Still another example of the "buy a feature, get a house" phenomenon
occurred during the Arab oil embargo of 1983, when oil prices climbed
sharply. Long lines and high prices at service stations had consumers
avoiding large, gas-guzzling cars like the plague. In the same way,
escalating home heating oil prices made properties with oil heat difficult
to market. During this period, Dirty House B with natural gas heat would
have still been a winner over Clean House A with an oil furnace!
The Moral of This Story.
Where all this is leading is straight to the purchase of real estate ASAP.
If history offers any lesson it is this: change is inevitable, and nothing
lasts forever. While this truth may be a comforting thought in times of an
oil embargo or high interest rates, it should also serve as a warning in
eras of economic prosperity and low interest rates. Anyone who is even
remotely interested in buying a home should seriously consider moving
forward. No one should be complacently lulled into believing that the
highly favorable home-buying climate that now exists will continue
indefinitely.