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The time is right to buy or sell

by Kim Cooper
| December 5, 2010 8:00 PM

This week's news of rising interest rates should get the attention of those contemplating a change in their housing status. These last three weeks we have seen a modest rise in interest rates among the nation's lenders. Fannie Mae reports that last week's typical 30-year loan rate was 4.46 percent, up from 4.17 percent last month. Although this rate increase is modest, less than half a percent, the cost of housing has risen accordingly.

Previously, we have illustrated savings tied to interest as rates dropped this year. Now, with interest rates on the rise the adverse is also true. A $100,000 real estate investment at 4 1/2 percent over 30 years will cost $30 a month more than at 4 percent. That is more than $11,000 over the term of the loan.

We all have budgets to consider. Lenders turn a keen eye to a buyer's debt to income ratio (DTI) and that $30 could make a difference to borderline borrowers already under the microscope after the loan debacle of recent years. If the $30 puts the borrower over the required 45 percent DTI, they are effectively out of the game.

Some experts forecast an increase to 5 percent on 30-year loans by the end of this year. This means that, even if the price of real estate price does not increase, it will cost you more to own it and therefore, may make it harder to sell it.

Rising rates have already had an impact on the refinancing market with reports that show declines in refinancing activity. An article in the L.A. Times reports that applications to refinance dropped below 75 percent of all mortgage applications for the first time since June.

The latest news from the National Association of Realtors (NAR) contributes the October rise of existing home sales to the low interest rates and discounted home prices driven by foreclosure activity. It only stands to reason then, that as interest rates rise this activity will also be affected, leading to a slow down in housing purchases.

That is why it may be a good time to buy, or to sell. The best time to sell is when there are lots of buyers. The best time to buy is when prices and interest rates are low. Although one could argue that the historic rate of 6 percent, the average over the last 10 years is low, buyers who have only recently entered the market will look at anything above their starting point as too high.

Most agree that the rise in mortgage interest rates will be slow, so for now, the opportunities look good for buyers and sellers alike. Coupled with the proposed sun setting of the mortgage interest deduction, any change in rates that is not downward will give all pause to think twice about moving ahead with a real estate transaction.

For a Safe trip Home, call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.

Kim Cooper is a Realtor broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your commentary and feedback. You may contact them by calling 667-0664 or by writing to them at 409 W. Neider, Coeur d'Alene.

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