The Problem with the Bottom

As an astute buyer, you may be thinking, I’ll keep looking for that perfect property and be ready when the market bottoms out.  After all, there is plenty of inventory, and if I don’t fall in love with just one property, I’ll have numerous opportunities.  It all sounds so reasonable, that I find myself nodding  in approval.

The major problem with this thinking is by the time “the bottom” is identifiable, it will have already passed.  And, the bottom for the condo market may be different from that of  single family homes, land, or locations.  The same holds true for price points.  The uniqueness of our market also creates difficulties in finding a replacement property similar enough to the one you identified as your best fit when it sells while you wait.

One indicator that a bottom has or is forming is the increasing number of multiple offers in our local market.  And, we continue to see that happening across all price points of properties. 

The other concept that is important to note is cost.  While interest rates remain low, currently, for every interest rate hike, the tangible costs rise.  For example, on a $300,000 loan at current interest rates of about 4.75%, the monthly principal and interest payment is $1564.94 for a total or $563,378.40 over 30 years.  If the interest rate rises to 5%,  your monthly payment is $1610.46 or $579,765.60 at the end of 30 years.  That’s not too bad…only an extra $45.52 per month or $16,387 over the life of the loan.  However, if rates rise a full percent while you are awaiting the market bottom (assuming you can identify it), here’s what happens.  The loan rate is now 5.75% with a monthly principal and interest payment of $1750.72 or $630,259.20 over the life of the loan.  That’s $66,880 over 30 years or $185.78 more per month than same loan amount at one percent less.

The whole point of this exercise is to remind you that  not only are you looking for great value in a property to acquire, but don’t lose the current opportunity for the greatest value of the cost of money and the best selection of properties.

If you would like more information about property values in the Steamboat Springs area, call me.  And, if you want to understand more about the cost of borrowing, I can put you in touch with some excellent local mortgage people.

Anne Mayberry     970.846.1425

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