Yes, interest rates are at historical lows … again. And buyers are hearing talk of them having nowhere to go but up … again. But seriously, now: we can’t foresee them going much lower (ergo the calls on Wall Street that the bond rally may be coming to an end), and apparently other sources would agree.
What does this mean in terms of purchasing power, for those of you waiting out the market for an extra 10% price drop in housing? Take a $1mm property with a $750k mortgage:
4.4% interest rate = $3,755 mortgage
5.0% interest rate = $4,026 mortgage (equivalent to a 6% difference)
5.5% interest rate = $4,258 mortgage (a 13% difference)
This means that it would take a 6% drop in housing prices by mid-2011 to make your monthly payments the same as they would be today at a 4.4% interest rate, or a 13% drop in prices by the end of 2011. This doesn’t even take into account the compounding effect of the interest payments over 30 years, keeping in mind that there may not be another attractive refinancing opportunity down the road. … not too shabby a reason to pull the trigger, perhaps.