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Waiting for the Ann Arbor Real Estate Market to Hit Bottom?

It May Already Have.

Washtenaw County home buyers trying to time the real estate market today may think they have it down to a science. It’s all over the news, in the papers; they hear that prices are dropping, and assume the bottom hasn’t arrived. So they wait.

But, there is just one problem. The bottom for interest rates, and possibly Ann Arbor home prices, appears to be gone. And it just so happens that interest rates are a very powerful determinant of how much home you can afford and what you’ll pay each month – even more powerful, in some instances, than the price you pay for the home.

Conforming 30-year mortgage rates are on the rise, averaging 4.85% for the third week of December. This is consistent with the Mortgage Bankers Association’s (MBA) prediction that the average rate on the 30-year loan will increase to 5.3% in the first half of 2011, and is expected to reach 5.5% by the end of the year. Meanwhile, the Michigan Association of Realtors reports that the average home price increased 8.59% year-to-date in October 2010 when compared to October 2009, and is forecasted to remain steady, while the U.S. economy will enjoy stronger than expected growth in 2011.

In Michigan, the economy is slowly seeing signs of improvement. State-wide unemployment has seen a steady decrease since July, with Washtenaw County’s unemployment rate dropping 2.2% for the same time frame, according to Michigan.gov. Consumer confidence has also increased from 48.7 in November 2009 to 54.1 for November 2010. And, while the Fed has stated its intention to purchase an additional $600 billion in Treasury securities, the MBA says this move is priced into current rates.

It may be hard to believe, but in the long run it makes more financial sense to buy a home at a higher price with a lower interest rate than vice versa. Interest rates can impact your payments and purchasing power more than the price of a home. A 1% increase in the interest rate can affect your purchase power by $11,000 per $100,000. So instead of trying to time the bottom for prices, get the best interest rate you can on a mortgage and home that’s right for you – and that time is now.

To learn more about mortgage interest rates and how they can affect your overall purchasing power, please contact the Ann Arbor Real Estate experts at The Bouma Group at 734-761-3060 or info@bouma.com. We can help you find the perfect piece of Ann Arbor real estate.  And please remember that we’re never too busy for your referrals.


Posted Wednesday, December 29, 2010 by Martin Bouma
Tags: ann arbor real estate, mortgage interest rate