Mortgages Are Part of the Bargain for Georgia Homebuyers

By Richard Barrington
Local Lender Columnist
Jul 16, 2007
Georgia's real-estate market finally eased a little in late 2006. And now with talk that the subprime-mortgage fallout will further dampen prices, it's easy to see why homebuyers think bargains await them. But a recent tick upward in interest rates reminds us that time is not always on our side.

Waiting for the other shoe to drop has always been a risky business where real estate is concerned, but it can be especially costly when interest rates are rising.

House Prices Down, Mortgage Rates Up

P. George Benson, dean of the University of Georgia's Terry College of Business, has described Georgia's real-estate market as a recession. While the impact in Georgia may be less than across the rest of the nation, this does suggest a period of falling prices. For potential homebuyers, that's welcomed news. So why not just sit back and wait for prices to get cheaper?

Well, while housing prices may be getting cheaper, mortgage rates may not sit still, since the recent trend has been toward rising treasury-bond interest rates. While this has not yet impacted mortgage rates, mortgages cannot stand still indefinitely if interest rates continue to rise.

The Effect of Mortgage Rates on Home Prices

Since prices and mortgage rates both affect what your house will ultimately cost, you need some sense of proportion in weighing the two. For example, a one-half percent increase in interest rates may not sound like much, but on a 30-year mortgage it would have roughly the same impact on your monthly payment as a $16,000 price difference.

So, while you watch prices and try to drive a hard bargain, just be aware that there are other factors in motion that can save — or cost — you significantly.

Sources
The Atlanta Journal-Constitution
Federal Reserve

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.