A lot of Las Vegas real estate Buyers have been sitting on the fence for months hoping prices would continue to drop. And have home prices dropped over this past year. Some areas in the Las Vegas Valley have seen up to a 30% price reduction on Las Vegas Homes in just this past year. But can they go much lower? I would think not.
Home prices per square foot are almost at a pre “Boom” level. Interest rates are at a historic low. Potential Las Vegas home Buyers have an opportunity to buy a home or condo now with an affordable monthly payment for a short period of time. A narrow window of opportunity now exists.
Why do I say they can buy at these rates for a “short period of time”? Simple, the cost per square foot on a home in Las Vegas is extremely attractive right now. Interest rates on homes may be at a historic low but can not go much lower and will most certainly rise considerably this year.
Historically, when our country begins to exit a recession we enter a period of inflation or hyperinflation. This means that interest rates on home loans will rise dramatically. So will the cost of the home. Under the President Carter Administration from 1977 – 1981 we saw mortgage rates run between 18-21%. Inflation rates in that same period were topping 18%. No one knows just how bad the inflation and interest rates will be in the near future under President Barak Obama. My best guess given the current state of the economy they will be staggering.
Rising interest rates alone is ample reason to act now if you are thinking about buying a home. Let’s do some math to illustrate what is at stake. If you are looking to finance a home at $200,000 at a 30 year fixed rate of 5.09% your payment would be $1,084.67 and the total cost of the loan would be $390,481.54 over the 30 year period. Now if you were waiting for that exact same house to be reduced by $10,000.00 and before you bought this home the interest rate jumps up only 1% the monthly payment would now be $1,150.16 and the total cost of the loan would be $414,058.72. So even if the home was reduced by $10k your monthly payments went up by 65.49 per month and your total cost over the 30 year loan went up by $23,577.18. And now this is assuming the price of the home was reduced the full $10k. If it did not, the difference is even more drastic.
|Buy Now||Wait For Price Reduction|
|Mortgage Amount:||$200,000.||Mortgage Amount:||$190,000.|
|Interest Rate:||5.09%||Interest Rate:||6.09%|
|Term of Loan:||30 Years / Fixed||Term of Loan:||30 Years / Fixed|
|Monthly Payments:||$1,084.67 *||Monthly Payments:||$1,150.16 *|
|Total Cost:||$390,481.54||Total Cost:||$414,058.72|
|* PMI and Property Taxes are not calculated into the monthly payments.|
Now there is absolutely no doubt that interest rates will go up in the near future. Will they go down any more before they go up? I have no idea, but the illustration above shows that once they do go up your total cost of hosing will increase substantially.
In my humble opinion we are all faced with a short term opportunity to purchase affordable housing. How long this window of opportunity will last is uncertain. So if you are considering purchasing a Las Vegas home in the near future the time may be sooner rather than later.