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Bay Area Move-Up Buyers: Now Is the Time to Act!
Many would-be move-up buyers have been sitting on the sidelines in recent months, crossing their fingers that the Bay Area’s superheated real estate market will cool. But conditions are about to get tougher – so hesitant move-up buyers should act now.
Looming ahead is the prospect of rising interest rates coupled with continued price appreciation in home sales. Buyers who don’t seize the moment will likely regret it with their checkbooks down the road. “I tell people to buy everything you can afford to buy with these interest rates today,” says Patrick Barber, president of Pacific Union’s San Francisco region. “They cannot stay this low forever.” We’re already seeing the truth in that statement. At the start of the year, the APR for a 30-year, fixed-rate mortgage was 3.41, one of the lowest levels ever recorded. But in June, rates crept above 4.0 percent. By the end of August, they were at 4.46 percent – a 31 percent rise. In mid-September, the Federal Reserve unexpectedly announced that it would continue purchasing mortgage-backed securities, a move that some feel could keep interest rates fairly low for the remainder of the year. Savvy buyers, however, will want to be prepared for a worst-case scenario. For example, let’s suppose that buyers who are upgrading their home will spend about 35 percent above the median sales prices, which was $715,714 across Pacific Union’s seven Bay Area regions as of September 9. Let’s also assume that the median sales price in the region will increase 12 percent annually and interest rates will climb 1 percentage point per year. By that math, move-up buyers who delay their purchases for two years could spend over $26,000 more each year in monthly payments, as well as almost $50,000 extra for their down payment. Some people have already worked out the math. In San Francisco, one of our top real estate professionals notes we are seeing the most activity in the move-up-buyer population since the recession. In Marin County, increasing inventory has spurred an uptick in purchases by move-up buyers, says Brent Thomson, Pacific Union’s senior vice president in the region. Click here to read more (Photo/Flickr: Insituto Inovacia)