Why Waiting to Buy Will Cost You
Whatever your situation is, whether you are a renter or move-up buyer, you may hope that waiting until next year will be beneficial. While the market may be slower and feature more inventory next year, this doesn’t mean conditions are better. In fact, there are some variables that go into whether you should buy a home now or wait another year. The main variables that go into your house search are: Where will prices be and where will rates be? Below we will go over why waiting to buy a home will cost you over the next twelve months.
How Much Higher Will Home Prices Be?
There is no doubt that real estate prices have soared in 2021. However, will this trend continue into the new year? Well, many different real estate economists are predicting price acceleration to continue in 2022. These economists see as high as a 7.5% increase, and as low as a 5% increase. While this may not seem like a lot of money, when talking about hundreds of thousands of dollars, any percent adds up quickly. Home price acceleration does look to slow, coming in much lower than the 16% increase we saw in Louisville, Kentucky in 2021.
According to NAR (National Association of Realtors), the median home price today throughout the nation is $354,000. If you use an average of the three economists expectations (in real estate economists hyperlink), home prices will increase by 6.5%. If you take the median home price and multiply it by 6.5%, that leads us to a median price of $377,000. That is a projected increase of $23,000 in just 12 months. As a prospective buyer, would you be able to afford a 6.5% price increase, no matter what your market is? Not many would be able to, especially those who are already seeing their rents increased.
Waiting To Buy Could Have Higher Mortgage Rates
According to Freddie Mac research, their mortgage rates were estimated to be at 3.1%. While these above 3% rates should not scare buyers, they still will add to how much you will pay back over the course of a 30 year mortgage. Many mortgage rate experts also predict that rates will continue to increase in the next year. There are many forecasts by major economists, with their average increase in rates coming in at 3.7%.
The Cost of Waiting To Buy
With the price and rate variables both looking to increase, there is a chance you will pay a lot more in mortgage payments each month. If we use the numbers from above, you can assume to pay over $200 more per month for 360 months on a 30 year mortgage. With a sales price of $377,000 and a 3.7% mortgage rate, it is assumed that you may be forking over $1,560 a month, before insurance, taxes, and other fees. The true cost of waiting to buy a home is a huge financial liability. If you take $200 a month and multiply that by 360 (months of payments in a 30 year mortgage), you will pay a whopping. . . $72,000 more over 30 years.
The bottom line is, you should not wait to buy a home if you do not have to. They always say time is money, and a waste of time is definitely a waste money. While not everyone has a situation where they can buy tomorrow, they should try to change their situation in order to not waste more time. In order to get ahead, buying a home is a major step as equity and net worth are tied to home equity in many instances. If you are looking to buy a home, feel free to reach out to our real estate team. We are a group of real estate professionals at Premier Homes Team, and are always willing to help.