The Hidden Cost Of Waiting To Buy Your Home
What If I Wait Until Next Year To Buy A Home?
While a home's value is a large part of the cost of owning a home, it is really just one part of that equation. As a buyer, you may be thinking about where prices will be in 6 months, but are you really taking into account all of the factors that make up the true ‘long-term cost’ of waiting?
According to CoreLogic, national home prices in 2018 increased by 6.2% year-over-year. From a cursory perspective, it could be said that waiting one year to purchase cost you 6.2% in 2018. However, if you were financing your home, it actually ended up costing a bit more.
Over that same time period, interest rates remained historically low, which has allowed many buyers to enter the market. However. the Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year.
What Does This Mean As A Buyer?
If home prices appreciate by 5.1% over the next twelve months as predicted by CoreLogic, and mortgage interest rates hit 5.1%, as predicted by Freddie Mac, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for $1,000,000, (or an $800,000 mortgage with traditional financing) today:
SOURCES: * Freddie Mac & ** CoreLogic
In this scenario, over a 30 year period, the true "long-term cost" of waiting one year to purchase the same home amounts to a staggering 18%, or $178,200, difference (not to mention other costs, like rent).
What To Consider:
If buying a home is in your plan for this year, doing it sooner rather than later could save you hundreds of thousands of dollars over the term of your loan.