Economic forces will in a little while shape property prices in North American markets; rising interest rates and/or inflation. So two additional reasons not to purchase real estate correct? Just the reverse because:. Interest Rates - When you purchase real property presently and get a loan with a 5% mortgage interest rate then you are benefitting from perhaps the hottest mortgage rates in the history of modern lending. You got to know, these are wonderful rates. And in the even lending rates get worse, your rate remains the same So, IF mortgage rates bump up to 8%, 9%, 10% or greater (remember mortgage rates were 12.75% in 1984) you'll be stylin'. In addition, let's say you have a given amount to spend on a monthly basis for your mortgage. If you buy today and lock in the cheap mortgage rates then less of the monthly mortgage payment will apply toward mortgage and a larger portion of your monthly payment goes toward the piece of real estate itself. Get more house but a smaller amount of loan costs. Buy Before Inflation Hits - If we experience double digit inflation (10% or worse) you would be wise to have taken advantage of our current property prices rather than waiting any longer. With inflation, the value of a dollar goes down. With inflation the value of goods jump because the value of the dollar goes down. If inflation is ten percent, merchandise will be worth ten percent more. For example a loft condominium that is worth $250,000 today will be worth $275,000 during a time of ten percent inflation. So, during inflationary times, while the dollars go down in value, real property and many supplies (groceries, {fuel|petroleum|oil|coal|, interest rates, silver, etc...) increase. With real estate, the value of your money is "protected" but with cash the value of your money is gone. Extra, The Force of Leverage - Leverage is a financial term for buying a piece of property using a relatively small amount of cash and financing the rest of the purchase price. In our example above, say you used $50,000 cash for the down payment and borrowed the remaining $200,000. Supposing inflation is ten percent a year then the $250,000 property will be worth $275,000 in a year. So with $50,000 cash down payment you profit $25,000 or fifty percent in just one year. Don't forget that those who do not have their money in assets like realty will actually lose ten percent of buying power in that same period.!! EVEN MORE - Pay With "Less Valuable" Money - In conclusion, if the worth of the dollar is reduced on account of inflation AND you have a fixed interest rate mortgage, then you are repaying the mortgage lender back with "less valuable" cash. As we saw previously, it might cost a buck to buy a loaf of bread at the moment but in the case of 10% inflation the same loaf will cost a dollar ten because the dollar is not as valuable as it was a year earlier. So, when you make a mortgage interest payment during ten percent inflation, those dollars are worth 10% less than they were a year earlier. No one knows when mortgage interest rates will bounce up or if we will face uncomfortably high inflation. But, with mortgage rates being so low, then one might expect they will increase. Remember, interest rates in the early 1980's were in the very high teens, yeah like 18%!!! People, if you can borrow nowadays at 5.25% or less then do it! If we do get hit with inflation then you'll be very pleased you bought sooner vs. later. The amount of homes and condos selling in Phoenix and nearby towns are way up, closing prices seem to have leveled off, there are still significant tax credits for many buyers, there are still tax benefits to owning real estate and IF loan rates and/or inflation take place, people who buy now will be glad they did. I'm not one of those overly optimistic realtors as I have compiled numerous blog posts about the trouble in the realty markets Nonetheless, I do believe in the fundamentals of economics and when the market starts “making sense” I am not afraid to chat about that as well. Real estate is beginning to make sense again and the agents at We Know Urban Realty can walk you through it
Article Source: http://www.articlecontentprovider.com/articlesubmit
Secure homes and condos without hesitation before interest rates sky rocket and we see double digit inflation.
The real estate agents of We Know Urban Realty LLC specialize in the sales and marketing of high rise condominiums, brownstones, loft condos and row houses in Phoenix, Scottsdale and Tempe. Will Daly has specialized in the Phoenix High Rise Condo market for over thirteen years.
Please Rate this Article
5 out of 5 4 out of 5 3 out of 5 2 out of 5 1 out of 5
