2008 Nov 15th
- A property listed at $500,000 today.
- A 30 year fixed-rate mortgage at 6%
- A 20% down payment
- Your approximate mortgage payment would be $2,400 per month
Same property a year from now, or a month from now, or a week from now
- Assume the price dropped 15% to $425,000
- The 30 year fixed is up to 7%
- Same 20% down
- Your approximate mortgage payment would now be $2231
The Hoboken Condo Buyer’s Bottom Line
Even though the property value in our hypothetical example declined 15%, the monthly payment only declined 7%. The savings a buyer might recognize through even a significant price reduction can quickly be eroded by an increase in interest rates. I’m not predicting what’s going to happen to Hoboken condo prices or mortgage interest rates in the future. Nobody knows that. But the facts are as follows; property values are low right now, as are interest rates. While property values may or may not fall a bit lower before they rebound, interest rates are far more likely to increase. Taking advantage of low interest rates NOW may outweigh the benefit of future price declines (which may never occur.) Do the math. Just some food for thought.