Philadelphia housing remains at near-record affordability levels, and prospective home buyers stand to benefit from the lowest mortgage rates in decades, as well as advantageous home prices. Housing is approximately 60% more affordable now than during the height of the market.
Mortgage rates once again set new record lows in early October to 4.19% and remained below 4.3% throughout the month. These historically low rates contributed to real savings for buyers. Furthermore, the longer the buyer owns the home, the greater the savings they will realize. As economic activity gains momentum, rates will rise to keep inflation at an acceptable level.
BTW the historical 30 year average for a 30 year fixed mortgage is 8.9%
John Paulson, a multimillionaire hedge fund manager, declared recently in Forbes that today’s record-low interest rates made this the best time to buy homes in fifty years. “If you don’t own a home, buy one,” Paulson said. “If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.” Paulson it should be noted was among the few to accurately predict the subprime collapse.
Buyers who choose to wait until prices come down more are gambling that interest rates will hold steady or drop. The truth is even a 10 percent drop in home prices is nullified by a 1 percent increase in interest rates. The figure below illustrates how this works for a $250,000 home purchase and the relative likelihood of each scenario.
**A 1% increase in mortgage rates is ten times more likely to happen than a 10% drop in home prices.
**A 1% rate increase more than offsets a 10% reduction in home prices.
**When interest rates fall by 1%, the total interest paid is almost three times more than the interest savings from a 10% drop in home prices.
**The probability of both happening at the same time is ridiculously small, and homeowners would still pay 15 % more in interest over the life of the loan.
For those who can afford to buy, trade up, or invest, our current market presents a lifetime opportunity.
posted by janice SEARCH the Philadelphia MLS. No Registration Required!
