[quote=ocrenter][quote=Rich Toscano]I think an interest rate based formula would be very interesting, but it would be important that it only get used by long-term buyers. As I opined in that recent article, if you are not a long term buyer you aren’t getting that big a benefit from the low rate, so it’s better to be concerned about prices and ignore rates.
However, for a long term buyer, it’s possible that prices could still be a bit high but rates could be low enough to compensate for that. That’s where your interest rate based formula could come in handy.
So it would be good to have two formulae: one for price-concerned buyers and one for payment-concerned buyers. I’d say the 2000 price plus 50% is probably about right for price. For payments we’d just have to factor in the different in rates between now and then. It’s Friday night and I’m too lazy right now but maybe I will mess around with it at some point.[/quote]
agree two formulae would be the best way to go.
I wonder if some of the piggs that recently purchased would be willing to try out the two formulae in private and let us know how they work out in their real life example.[/quote]
The trick for me is arriving at a 2000 price. My house was hard to comp a few months ago when I bought it. It’s even harder to figure out what it should have comp’d out at 11 years ago.
That said, I ran some similar numbers when we made our offer and I tried running them again with these criteria and either way, I don’t think I got a price that “fits” (i.e. I paid too much).
On the other hand, there is a 2000/2001 price I can arrive at that looks much more favorable based on prior sales of my house and appreciation averages that makes it look much more favorable. (I just have to make sure I’m not kidding myself). When I ran (and now run) against that, it’s not so bad.
I’m really describing the problem you can run into when you try to apply these kinds of formulae to a specific property and not much of a solution, but I imagine a number of people run into this kind of thing, including those who are buying properties in newer areas.
