Is a bird in the hand worth 2 in the bush? I was musing at my desk this morning about all things real estate, the stock market, the jobs loss report and the incredibly low interest rates out there. So I asked myself, which is better? To buy today with today’s low interest rates (with the possibility prices may still decline 5%), vs. the idea of waiting for prices to stabilize and then start up (but that interest rates will have climbed back to “normal” to compensate for that stabilization). Here’s how the numbers look…

Assumptions: you buy a home for $310,000 with a $300,000 FHA loan.

1. Today’s interest rate is about 4.75% with a payment of $1,565/month. For 10 years you’d pay $187,800. BUT, assume your home still goes down 5% until prices stabilize and go back up again. You’d “lose” $15,500.

2. You decide to wait until the market “bottoms out”. So now you wait for (how long?) but the interest rate for that FHA loan is now 6%, which is $1,800/month, or $216,000 over 10 years. The good news – property values are now going up, not down, so you’re “safe”.

The bad news: you’ve lost real cash to the tune of over $28,000, or about $235 a month. The $15,000 “loss” is only a “loss” if you sold your home at the bottom (unlikely), but that $28,000 interest rate loss is real cash.

Something to think about as you sort out the mix of economic news swirling around!