Alan Shapiro
President, Winchester Homes Inc.


What a great time to be in the market for a new home. Prices and interest rates are at lows we have not seen for many years, selection is great and sellers are extremely flexible. Things are so good in fact that many buyers get so caught up in catching a bottom, they risk this once in their lifetime opportunity. In fact holding out for that last few thousand dollars in a negotiation may end up costing them hundreds of thousands in the long run.

Why do I say that? Interest rates are artificially low right now as a result of the Fed trying to support the economy and jump start economic growth. The trick is that this cannot go on forever and at some point growth will have surprisingly occurred. At that point the fed will react and pull back to avoid inflation and rates will rise. It is my opinion that we will see mortgage interest rates in the range of 8% in just a couple of years. Prices too will rise as the economy begins to improve. In fact homes are being offered in most areas at prices that are not economically sustainable in the long run.

As the economy improves prices will begin to rise. Effective prices will rise first as incentives are pulled back and in the longer run actual base prices will rise as well. Buyers that had waited on the fence to get that last couple of thousand dollars will then be scrambling to get the deal they had already left on the table months before. Even if they are successful they will most likely be paying a higher rate of interest than they could have had originally. If rates were to go up from 5.5% to 8%, the difference in interest expense on a $300,000 mortgage would be well over $170,000 over the life of a thirty year loan.

Timing a bottom is very difficult even for the most sophisticated investor. Who knows if we are at bottom yet or just very close. The point is that the potential cost of achieving that last couple of thousand in savings just may not be worth the larger upside risk.

I saw it time and time again during my years of selling homes, a prospect coming back time and time again trying to get a deal they had in mind only to see that prices had risen or incentives had gone away. Each time they tried to get the deal they could have had the time before, only to ultimately buy something that was less than what they really wanted at a price higher than they could have had.

Do you believe that interest rates will stay this low for long? Can prices remain this attractive for much longer? Is the last couple of thousand dollars that stand between a deal really worth the risk of losing the right home in the right community?


Winchester Homes is an award winning builder of luxury new homes in suburban Maryland and northern Virginia. Winchester Homes is known for it's innovative "Your Home. Your Way" program. Discover what you can do, building Your Home. Your Way.™ Expand the kitchen. Add a solarium. Move the master bedroom to the ground floor. If you can dream it, we can do it, when you choose Winchester Homes' exciting Your Home. Your Way. program. Learn more about the process and begin building a home that complements your life!