Is the Interest Rate, “Cost”, More Important than Price?

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The depressed home prices we are experincing in the Sedona Real Estate market paired with historically low interest rates,if you are using a loan to help with your home purchase gives, gives Sedona real estate buyers increased buying power. KCM Blog illustrates what that means in dollars and cents. I want to share their illustration that when buying, COST is more important to consider than PRICE…


Interest Rates WILL rise and will have an impact on your buying power. NOW is the time to make a home purchase.

We have often advised buyers to look at the COST of purchasing a house more than the PRICE of the home. Obviously, price is part of the cost equation. The other piece, assuming you are not an all cash buyer, is the mortgage rate. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost. Recently, there are more people talking about the possibility that mortgage rates could begin to increase.

HSH.com studies trends in mortgage rates. They explain:

“A better economic climate almost always brings higher rates, and a lessening of the troubles in Europe from massive central bank assistance adds to the movement of money from safe havens to more risky assets, driving rates upward.”

Dan Green of The Daily Market Reports recently stated:

“The Fed sees growth coming faster than originally expected. There’s suddenly less chance that the Federal Reserve will intervene to help keep mortgage rates low. Absent Fed intervention, mortgage rates are apt to rise and Wall Street is now betting that the Fed has bowed out. With no stimulus, mortgage rates rise.”

Lawrence Yun, chief economist for the National Assoc of Realtors, recently wrote:

“Mortgage rates will be starting to rise. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent.”

We do not attempt to predict future interest rates. We leave that up to the experts in the field. However, we want our readers to understand the potential impact on the cost of purchasing a home if they do rise. Here is a simple table that shows, even if the PRICE of a home softens, the COST of a home could increase.


Here are the numbers. Even if prices should soften, if interest rates rise even by the smallest increment, the cost increases and your buying power is diminished. The time to buy is NOW.

Bottom Line: Many purchasers think they should wait until they are sure that prices have hit bottom. The bottom of the market is not the only factor to consider in this market. Interest rates have an significant impact on the COST of a home and we have to be pretty sure they will be heading up. This may be the best time in many years to consider Sedona Real Estate!

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About the Author:

Randy Crewse has been in the real estate business since 1974. He has sold many types of real estate from farm land and timberland, residential properties to commercial buildings and vacant land. Randy has either owned or managed real estate offices for for over 30 years of his 42 years in the real estate business. Randy and his wife Milton have made Sedona, Arizona their home since 1994.