Has the central Indiana real estate market already hit bottom? If not, are we anywhere near the bottom? As the saying goes, a picture is worth a thousand words–or in this case, a graph. The above central Indiana data clearly shows that a bottom occurred in February, 2009. While there have been fluctuations, as would one expect, average prices have been on the rise since then.
Real estate broker Mike Woods of MS Woods Real Estate recently stated, “My opinion is that the bottom of the central Indiana housing market (in terms of average selling price) has already occurred. It happened in late in 2008 and early in 2009.”
Woods also points out that the “central Indiana housing market never had the wild appreciation that occurred in a lot of the major cities and on the coasts. We just didn’t have as far to fall as they did.”
The following chart shows that median home prices over this same period also hit bottom in February, 2009.
But put aside actual market data for a moment and consider how mortgage interest rates affect a buyer’s purchasing power literally overnight.
- Although the principle+interest payment of $760 is the same in all cases, purchasing power drops as rates rise.
- For example, a $150,000 loan at 4.5 percent is equivalent to a $138,000 loan at 5.25 percent. Just a 2-percent increase equals a whopping $30K difference.
- Think rates can’t go up? Not only do mortgage rates change throughout the day, they can change significantly overnight, depending on market forces that cannot be predicted.
- All it takes is the right kind of economic report to send long-term rates soaring. But as the above chart clearly shows, they do not have to “soar” in order to have a significant effect.
In closing, the above data suggests the market hit bottom in February, 2009. Combine this actual data with the very real possibility that interest rates could rise at any time and there is a strong case to be made for buying now rather than later.