Buyers

Lets take a look at the significant importance interest rates have on purchasing a home with a 30 year mortgage.

Let say you qualified to purchase a $500,000 home on Monday.  Then on Thursday of that week, interest rates rise only 1%.   To many peoples surprise, with just that little rate increase, you would only be able to purchase a $450,000 house with the same monthly payment as compared with the lower rate.  To purchase the same house at $500,000, (at the higher interest rate) your payment would be an extra $329 per month (nearly $4,000 more annually, or nearly $120,000 over the 30 year term of the loan).  If there were a 2% rate increase, this would would of course double those numbers for a total cost of more than $240,000 over 30 year term.

Clearly the Purchasers monthly payment, as influenced by interest rates, rather than the sales price, is one very important factor in determining when its a good time to buy.  A seemingly modest 1% change in interest rates can amount to a total additional expense of nearly 25% of the purchase price over the term of the mortgage.  So, if you are planning to buy Hawaii Real Estate, a big question becomes - Where do you think interest rates are headed next year?

While we continue to benefit from historically low mortgage rates, most economists see a serious threat of inflation. Some people remember the days of double digit interest rates and, although we don’t forecast a return to this environment in the near future, the scenario above shows how any interest rate changes will impact the market.  It is a reasonable possibility that a 1% to 2% percent rate increase above existing rates could take place.   2009 is full of low rates, low prices and government incentives.  Contrary to what the news media may be saying about Real Estate, now is a really good time to nab that perfect property at a price you can feel great about!

Furthermore, if you have to sell a property to purchase another, this is the perfect market.  In addition to the lower interest rates and wide selection of properties, if there is a loss on your sale, it can be matched by your gain in a better deal on your next purchase!