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Buyers – Would You Prefer an $80,000 Incentive or $8,000 ?

In Philadelphia, the spring market has not been too "springy". This spring certainly has not been like spring 2010, "the end of the world" craze where the inventory was non-existent and there was an insane rush for buyers to meet the deadline to qualify for the First Time Homebuyer Tax Credit to receive the $8,000 incentive.  That incentive propelled the market last year:  it was a boon for sellers locally and provided necessary support to keep the housing market afloat nationally.

So what about today ? The housing market in Philadelphia continues to hold up well, although the inventory has crept up and prices are soft.  The great news for buyers is that interest rates year over year are down well over a point (at historical lows).  Rates last year were about 6 percent whereas now they are about 4.5 percent !  What does that mean ?  To me, this is the best incentive ever for a smart buyer.

When you compare year over year, a buyer can save $80,000 over 30 years. For example, on a $250,000 loan, the interest portion at 6 percent on a 30 year mortgage would be approximately $289,600, and at 4.5 percent it would be approximately $206,000, a savings of interest of $83,600 in one year.  If your loan amount is higher, the savings of course would be even more.   The other benefit that this does is that allows a buyer to get a better property since the purchasing power is at the highest with rates being the lowest.  With the inventory being at its peak level right now, a buyer can be quite selective when purchasing a property and be like a kid in a candy store.

I have heard some pundits on TV recommend to bring back the tax credit.  Although I know that will certainly make the market more springy, my point is there is incentive enough in the market right now without having to burden the taxpayers.

We are taking buyers out every weekend taking advantage of the above scenario.  These folks will be well positioned in the years to come !

If you are on the fence now, why not take advantage of $80,000 incentive ?

Pretty much a no-brainer for potential homeowners if aligns with your other goals.

With interest rates so low, the time is NOW.  What are your thoughts ?