What do the numbers $276,167, $266,742, $274,670 and $264,478 all have in common?
Ok, I will help out a bit. The numbers represent the average sale price of homes in Conshohocken from 2006 through 2009. Now, can you guess which number represents which year? (If you can’t, check out the answers below).
2009 – $276,167
2008 – $266,742
2007 – $274,670
2006 – $264,478
Now here comes the real challenge, where will 2010 end up compared to these past years. Unfortunately, the crystal ball is sitting here with no batteries, so I can’t just provide the answer, but we can discuss a few areas that will certainly impact our local market.
First, let’s start with mortgage rates. They are currently at historic lows and at the time I am writing this, they are in the low 5’s. Let’s just say rates go up a full percent to 6. How does this impact value and affordability? If we base it on 2009’s average sale price of $276,167, a mortgage at 5% is $1,482 per month and if it goes up to 6% it would be $1,655. This $173 price difference will have an impact on both what buyers are willing to pay for and what they will qualify for. The buyer who is only qualified or willing to pay $1,482 per month can now only afford a home at $247,000.
Second, the first time buyers tax credit. The government has decided to extend this credit through the upcoming spring market. The credit has certainly contributed (at least somewhat) to the increase in average sales price as seen above. Early studies have shown the credit has impacted some 25% of 2009 sales (on a National level). While extending the credit, the government also added a full $6,500 tax credit to move-up buyers. Clearly, this will also help bolster the market. How much? To what effect can it help offset any interest rate increases?
Generally speaking, short-term predictions are as good as the paper they are written on, but that doesn’t mean one should completely disregard the facts. Just remember, when buying or selling a home, your decision should be based on your goals (both personal and financial as we have written about previously) and certainly should not be based on guessing which way the market will head. Of course, if you know where the market will end up, let me know!