Alexandria VA Homebuyers May Soon Feel The Effects of Tapering

Taper

Alexandria VA Real Estate News - The Alexandria VA real estate market has been on holding steady since January.  Fueled with low inventory and record low interest rates, spring arrived two months early in 2013 as buyers battled for homes and sellers enjoyed the financial payoffs that came from escalating sales prices and low days on market.  Now that the market has gained momentum, and the economy is recovering, the federal government will likely start to tapering asset purchases which will result in increased interest rates.

Tapering means the pulling back, or lessening of the bond purchases that has played a role in keeping interest rates low.  The past twelve months have been an optimal time, especially for move-up sellers.  Selling a current home that recently appreciated and moving up to a larger home with an interest rate below 4% is ideal for a low mortgage on a bigger house.  Not to mention the fact that a low mortgage payment makes the home more ideal for rental purposes (calling all investors).

Mortgage Rate ProjectionsAll of the stars are in alignment that we will see interest rates start to rise.  Take a look at what economists were projecting this time last year.  In October 2012, interest rates were projected to be at 4.4%.  According to Bankrate.com, today's interest rate for a 30-year fixed mortgage with zero points is 4.52%.  Even as more inventory starts to enter the market, the psychology of paying more than 4.0% will take some time to sink in for many Alexandria VA homebuyers.

The number of active listings in Alexandria VA was at its lowest point in January 2013, and that's when we began to see excitement back in the market. Inventory has been on a steady incline since January, but the number of closed home sales have been on a steady decline since May.

Any Alexandria VA homebuyer who is on the fence right now shouldn't be boggled down with trying to negotiate the price down so much, but understanding the fact that waiting to buy a home means a higher monthly mortgage payment.  Even if the rate at which prices have increased over the past twelve months slows down, the higher cost of borrowing could price some buyers out of their currently approved price range.

Take a look at the example below with regards to home pricing and monthly payments.  Considering a starter home for sale in Alexandria VA priced at $250,000, a mortgage with an interest rate of 4.3% results in a mortgage payment of $1237.18  But waiting until interest rates creep up, just by one point to 5.3% means an increase of over $160 per month in the mortgage payment.  Keep in mind that this is before taxes and insurance are added in, or month association fees.  Black Friday and Cyber Monday are over, but right now, the cost of real estate is still on sale.

The Cost of Waiting
 

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