i had a wrong-number caller and now i can’t get back to sleep. i surfed around and read an article on yahoo finance with a quote that seems a little questionable. it’s about people on the sidelines of the real estate market waiting for lower prices before they buy.
Bruce Norris, president of The Norris Group, a real estate investment company, said now might be the best time to purchase a home, if the buyer plans to live there for 10 years.
“I’m not sure that I wouldn’t rather pay today’s price with today’s interest rate than count on a big discount and the wild card that interest rates might be very different,” Norris said.
“It would not shock me to have a 10 percent interest rate by the end of this negative cycle,” he said.
i agree with bruce’s assessment that 10% mortgage rates would not be a shocker. but i wonder what affect he thinks that is going to have on prices. he seems to be implying that purchase prices would not adjust to a level reflecting the higher cost of financing. i guess, to be fair, he says that he is not sure about what he would not rather do, and he offers the caveat that his advice is for people planning to buy and hold over a 10 year period.
Well the premise of your argument stems from the idea that there will be parity in the price difference then compared to the increase in interest rates – historically this has rarely if ever been true, especially with trending price levels.
Of course, it’s all hypothetical conjecture – the point is well taken.
–Dan
your point is well taken too dan. i will add to my argument that given the number of ARMs due to reset in the next 5 years, a tightening credit environment, a housing market already in recession, and a hypothetical situation of 10% rates, the conditions might exist to give rise to the anomalous parity you pointed out in my argument. still purely conjecture, but i like to speculate about these things.