In the current real estate market many people find it hard to decide their best course of action. Prices have been dropping, so buyers wonder if they should wait to see if they will go lower before they buy. Sellers know that their home was once worth more than it is now, and wonder if they should wait until it goes back up before they sell. If you fall into one of these categories, here are a few facts to keep in mind.

As a seller you should consider that there are still many bank foreclosure properties yet to come on the market, as well as a backlog of other owners waiting for the conditions to be right to sell who will begin to enter the market when conditions seem better. These two supplies of homes entering the market will put downward pressure on prices, minimizing the likelihood of significant sustained price increases in the near future. My personal feeling is that prices in our area will be flat for the next two to three years and could take several years more to reach the peak we saw in 2006-2007. While it doesn’t feel good to sell a home for less than it used to be worth, chances are that you will be buying a replacement home at a reduced price as well. So if now is the right time to sell for personal reasons, waiting for the market to improve could be a long and unnecessary delay in getting your life moving in the direction you have in mind.

 As a buyer, you should consider the fact that average list prices in the area I watch have been moving up and down around approximately the same level since mid to early 2009. At the same time, interest rates are currently at record lows, a 30-year mortgage averaging 4.54% with .7 points this last week. While interest rate increases have not yet occurred as predicted, they will begin to go up, probably in the next few months. Every 1/8 point increase in the interest rate is equivalent to increasing the home price by about 1.5%. For example:

Home Price = $300,000

Interest rate increases from 4.5% to 4.625%

Equivalent to price increasing to approximately $304,500

Because of this, assuming you would be financing the purchase, it is very likely that the cost of buying a home will increase in the coming months, even in the face of the probability that prices won’t be increasing. If you have considering buying and have the means to do it, now is a very good time to buy. Could there be an even better time in the future? Certainly, but trying to hit the very top or very bottom of a market risks missing the opportunity all together.