Time really is money

You must have seen the news last week as headlines screamed, "Rising Homes Sales Point to a Recovery." It seems that the economy is so slow that any news is good news, although the discriminating reader is bound to suspect any improvement, given that real estate prices continue their decline.

The headline above appeared in Thursday's, "USA Today." Beneath that bold statement was a cautionary subtitle, "Prices expected to keep falling..." One may wonder how falling prices could point to a recovery, but the reality is - real estate sales are moving forward. On a recent trip to Boise we discovered our peers in the southern part of our state are reporting increased activity, just like our local members.

Although not the free-fall of 2008-2009 we continue to report declines in many areas of our Multiple Listing Service. Last week's report actually showed some increases in average prices, most notably in the Rathdrum and Hayden areas. The appreciation of these neighborhoods though should be viewed as fragile since foreclosures know no boundaries. The threat of further foreclosures makes us all tentative about pricing, but we are encouraged that present day prices are providing opportunities that many are finding too good to pass up.

Albeit at lower prices than in recent history, movement is good for our economy. As we transfer ownership of property from one entity to another, people get paid. Not just the seller of the property but the people who are instrumental in its transfer. Title companies, insurers, appraisers, inspectors, Realtors, even county recorders offices benefit from the increases in transactions. When these people spend that money it helps the economy of our entire community. One could argue, especially at tax time, that this helps the country as well.

Based on the assumption that home prices may continue a downward trend, many buyers are likely still reluctant to make a move. Waiting is a questionable strategy though, since interest rates are precarious and it is anyone's guess how long they can remain at historic lows.

Take a look at the difference a purchase today would make should prices drop the 5-7 percent the article asks us to anticipate. With last week's IHFA rate at 4.6 percent, $100,000 of borrowed money will cost $512.64 per month for the next 30 years. Over that 30-year term you will pay $84,551.97 in interest. At 5 percent that monthly amount will be $536.82. Not very compelling right? But over the course of 30 years the total interest paid increases to $93,255.78. That's an additional $8,703.81 you are paying for the property over the term of the loan.

Now, stay with me. If you're waiting for "the bottom" of the real estate market and if the national predictions are true for our area, "...5 to 7 percent" and if, they reach that maximum prediction of seven percent you still lose more than $1,000 by waiting!

$100,000 minus 7 percent equals a depreciation of $7,000, yet if interest rates increase 4/10ths of one percent you will pay more than $8,000 in additional interest over the term of the loan.

Many of the conversations with Realtors of late have included the descriptive term, "investor" when alluding to the buyer they are working with. In other words, many of the folks making moves to buy real estate now - all types of real estate - are predicting a profit on their investment.

Holding real estate long term has always been the wisest move, but when you can buy low, at extraordinarily low interest, maybe it's time to make a move where you and your heirs will profit. Ask your Realtor to help you with, "time value of money" calculations to see the real effect of waiting.

Trust an expert... call a Realtor. To find a Realtor to represent you visit the Coeur d'Alene Association of Realtors website; www.cdarealtors.com. There you can also search available properties in the Multiple Listing Service.

Kim Cooper is a real estate broker, Realtor 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, 83814.