Buy now or wait for a price drop?

According to the December issue of Money Magazine, it may not pay off to wait for prices to fall on the house of your dreams. Working with a purchase price of $250,000.00 on a conventional loan (20% down payment, 30-year fixed mortgage) two different scenarios are given.

• SCENARIO 1: BUY TODAY at a 4.2% interest rate= $978 monthly mortgage payment
• SCENARIO 2: WAIT for the home price to drop 5%, but mortgage rates rise 1/2 a point to 4.7%= $985 monthly mortgage payment

As you can see, waiting for home prices to fall isn't necessarily going to save you money, particularly if interest rates creep upwards while you're waiting.  Timing this market is tricky, to say the least, and a lot of the time it comes out a wash in the end...
The lesson here?  If the perfect house is sitting in front of you today, and you're able to get it for a price that makes sense for you (and for the current market), don't wait---- you may not be saving as much as you think by waiting for the price to drop.  Get a good agent who can negotiate a great price for you and take advantage of the low interest rates now.