Interest Rates Impact Home Sales

The Impact of Interest Rates on Home Sales


Some potential homebuyers are sitting on the sidelines waiting for housing prices to hit bottom. It makes sense to buy a house at the lowest price possible but there are other critical considerations you need to keep in mind.

Waiting for the housing market to hit the bottom is always difficult and not always the smartest thing to do. While the market is propably not at the bottom yet, interest rates are at historic lows, and many homebuyers are failing to consider the savings that come with lower interest rates, particularly over the life of the loan, or even the partial life of the loan since you pay a huge part of the total interest in the first fiew years of the loan.

Mortgage rates are low right now because of the recession and large quantities of home foreclosures. In addition, the Federal Reserve has moved aggressively to push down mortgage rates by buying as much as $1.75 trillion of housing debt and Treasuries this year. This policy has been successful in lowering interest rates. Rates on 15-year and 30-year fixed-rate mortgages are hovering at historic lows right now.

What does this exactly mean for you, the home owner/buyer?

It means that on a 30-year fixed-rate loan amount of $200,000 at 5%, the interest paid over the life of the loan is $186,512. That brings the total loan payments to $386,512. At 6%, the amount of interest paid rises to $231,676, a 24% increase. At 7%, it’s $279,018, a 49% increase. The lesson you need to learn here is this: You need to keep in mind what really might be gained from a further drop in housing prices as compared to what could easily be lost by a rise in interest rates.

With regards to the market in it’s current state, let’s review some recent indicators. Pending home sales, a forward-looking indicator based on signed contracts, rose 6.7% in April, the biggest monthly jump since October 2001. Existing home sales rose 2.4% in May with some homes, once again, receiving multiple offers. Note that most of those were probably at below market value to begin with. Mean while the most recent Standard & Poor’s/Case-Shiller 20-city housing price index shows the month-to-month decline in housing prices has stalled from 2.8% in January to February, 2.2% in February to March and 0.6% in March to April. This has led many industry experts to anticipate that soon the decline in housing prices will bottom out.

If you have a house in mind and the savings in hand right now for a down payment, this might be a great opportunity to purchase a home. One the other hand if you don’t have the down payment in hand, then now is the time to add a home business income stream to your portfolio to get the cash you need… before the market reverses itself and you begin to start telling yourself… if only I had back when.

Click here to visit my website and learn how you can start your own personal home business for FREE with Free video training that takes you by the hand… step, by step:

Thanks for your time,

Wes Waddell

> Rantings,Training — Wes @ 10:50 am

July 17, 2009

Jobless Rate Highest Since 1983…

On Tuesday, June 30, the Conference Board reported that its consumer confidence index fell to 49.3 in June from a slightly revised 54.8 in May. Economists had expected an increase to 55. The index was benchmarked at 100 in 1985, a year chosen because it was neither a peak nor a trough in consumer confidence.

The Standard & Poor’s / Case-Shiller 20-city housing price index dropped 18.1% from April 2008 to April 2009. It was the third straight month the index didn’t post record drops, indicating that the slump in home values might be easing.

The Institute for Supply Management reported the monthly index of manufacturing activity rose to 44.8 in June from 42.8 in May. Though any reading below 50 signals contraction, it was the sixth consecutive monthly increase from a record low of 32.9 in December.

The Commerce Department reported total construction spending fell 0.9% in May. Economists had expected a 0.5% decline. Meanwhile, construction spending in April was downwardly revised to a 0.6% gain. Also, a March increase of 0.4% was revised to a 0.4% drop.

The National Association of Realtors reported that its pending home sales index, a forward-looking indicator based on signed contracts, rose 0.1% to 90.7 in May from an upwardly revised 90.6 in April. It was the fourth consecutive monthly increase after the index hit a record low in January.

The Commerce Department reported factory orders rose 1.2% in May, after a revised 0.5% increase in April. It was the first back-to-back increase in nearly a year.

The Labor Department reported the jobless rate rose to 9.5% in June from 9.4% in May. That’s the highest level since August 1983.

Upcoming on the economic calendar are reports on consumer credit on July 8 and wholesale trade on July 9


It’s time to protect yourself and your family from inflation and the woe’s of the economy… Learn for FREE how to start your own Multi-Income Stream Home Business:

has full details and the FREE Home Business Video Training Course.

Until Next time…

Wes Waddell


> Marketing Review,Training — Wes @ 11:46 am

July 6, 2009