Weichert Survey Shows Price is King When it Comes to Consumers
MORRIS PLAINS, N.J. – Despite all-time low interest rates, price is still top of mind with buyers according to a recent survey by Weichert, Realtors. Half of all respondents (51 percent) who intended to purchase a home in the next six months listed affordable home prices as a motivating factor followed by relocating (40 percent), upsizing/downsizing (34 percent) and low interest rates (31 percent).
“The survey shows that consumers are still responding to affordable prices but it does seem that they have become a bit accustomed to low rates,” said James M. Weichert, president and founder of Weichert, Realtors. “While a cheaper purchase is obviously desirable, the reality is getting a lower rate can often be more beneficial and save a buyer thousands of dollars more over the life of a loan.”
Perhaps one reason more respondents didn’t list low rates as a motivating factor is because they don’t believe rates will rise. Of those polled, 56 percent said they don’t believe interest rates will increase in the next six months. Low rates may also not be resonating with buyers because they are unaware how even a modest rise in rate can significantly add to the total cost of a home.
For example, if you bought a home today for $300,000 with 10 percent down and a 30-year fixed mortgage at current interest rates, your monthly mortgage payment would be approximately $1,368. However, should interest rates rise just one percent your payment would increase by $165 a month. Over the course of 30 years the increase in rate would cost a buyer nearly $60,000.
Even if home prices decline, the money saved on the purchase price may not be enough to cover the additional expense of financing when rates go up. Assuming you waited to purchase the $300,000 home above until the price dropped 5 percent, it would still cost you an addition $88 a month or nearly $32,000 over a 30-year period with a one percent increase in interest rates.
The online survey of nearly 500 visitors to Weichert.com, a top 20 real estate Web site, also revealed that consumer perception of what constitutes a high rate is drastically lower than the market reality. Nearly half (45 percent) of those surveyed would view interest rates as high at six percent. However when you consider the fact that according to Freddie Mac interest rates topped 18 percent in the early 1980’s and remained above 10 percent at the start of the ‘90s, a rate of six percent is actually still quite low historically.
“With rates hovering in a consistently low range and with so much attention being paid to the market correction the past few years, it is understandable that consumers have been more focused on price,” added Weichert. “However, those who take for granted that rates will remain at this historically-low level indefinitely may come to learn first hand what an important factor rates play on the overall affordability of a home purchase.”
Weichert has nearly 18,000 sales associates in approximately 500 company-owned and franchised sales offices in key markets throughout the U.S. A family of full-service real estate and financial services companies, Weichert helps customers buy and sell both residential and commercial real estate, and streamlines the delivery of mortgages and home and title insurance. For more information, Weichert's customer service center can be reached at 1-800-USA-SOLD or at Weichert's Web site, www.weichert.com. Each Weichert franchised office is independently owned and operated.
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