With prices increasing, multiple offers the norm, and limited housing inventory, potential buyers are wondering if now is the right time to buy.
Pandemic relocations and a booming local economy have fueled incredible growth in the real estate market, which has resulted in a 30 percent increase in property values over the past year. But the secret sauce in that growth has been the incredibly low interest rates.
IMPACT OF INCREASING RATES AND VALUES ON PAYMENTS
| Purchase price | Loan Amount (20% Down payment) | Interest Rate | Monthly Payment (P/I Only) | |
| Today’s Value | $500,000 | $400,000 | 3.50% | $1,796.18 |
| +5% | $525,000 | $420,000 | 4.00% | $2,005.14 |
| +10% | $550,000 | $440,000 | 4.50% | $2,229.42 |
Rates below 3 percent offered more opportunity for more buyers to purchase property and refinance existing property. While some may think it is better to wait to buy until there is a price correction, our incredibly low supply of homes and excessively high demand indicates that prices will increase for years to come. The challenge we have this year is that property values and interest rates are increasing at the same time. We are anticipating a 10 percent increase in values this
year and a 1 percent minimum increase in interest rates. This chart shows just how increasing values and rates can impact your purchase of the same home. Let’s say you can’t afford a higher payment and you can only qualify for $1,800 per month; if rates went up to 4.5 percent, your maximum purchase price would now be $443,750 instead of $500,000.
If you are looking to buy or sell in 2022, now is definitely the time and it is important to build a great strategy to accomplish your real estate goals. Let us help you figure out how to hedge these increases and look at the process with the long view in mind. Investors there is still room to gain equity in an increasing market. It is not too late to invest in real estate whether this is your first home or your next home!
John and Natascha Karadsheh are co-owners of KOR Properties, a boutique real estate brokerage serving the Valley of the Sun, and the creators and founding sponsors of Mesa Food Truck Fridays. John has been a Multi-Million Dollar producing agent for over 20 years and is an Accredited Buyers Representative (ABR) and Certified Residential Specialist (CRS), a member of the Arizona Regional MLS Rules & Policies Committee & Appeals Committee, and the West and Southeast Realtors of the Valley Professional Standards Committee.
Natascha is an Associate Broker, a MultiMillion Dollar Producer, Founder of Mesa Food Truck Fridays, Member and Past-Chair of the City of Mesa Economic Development Advisory Board and serves on the Board of Directors of the Greater Phoenix Economic Council.
You can reach John at (602) 615-0843 and Natascha at (602) 909-4995, or visit their website: KORProperties.com.