Tuesday, February 3, 2009


It is so interesting watching people wait for prices to hit rock bottom here in Canada! The problem is that the media is indicating recession, and that prices are falling. Let me share a little historical trend for you. Last year our board reported the 2008 stats and comparing them to 2007, I can tell you that prices have not dropped the way that the media is reporting. Sure in some locals it may be relevant, but in areas such as Bruce County, where employment, and economic concerns are not as bold, prices remain stable. So what then makes this a perfect BUYER opportunity? Selection, interest rates and small price drops!
Consider a house price in 2007 at 195,000 and the same house now at 200,000. Although some may think it's costing them more to purchase really it is not.

On average, interest rates in 2007 were 5.7% and today in February 2009, 4.6%

Assuming a fixed Term of 5 Years and a 25 year amortization

Mortgage 1 $200,000 @ 4.6% would have a monthly pmt of 1118.09
Mortgage 2 $195,000 @ 5.7% would have a monthly pmt of 1213.06

Mortgage 1 would pay almost $43,000 interest and $24,117.64 in principal
Mortgage 2 would pay over $52,000 interest and $20,570 in principal

So as you can see, Mortgage 1 which is at todays home price and lower interest than last year, actually costs you less in monthly payments, interest and your are putting more of your hard earned money towards principal. So, what makes more sense, waiting for prices to fall and interest rates to rise?

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