Nearly every industry has been impacted by the Covid-19 pandemic, and the housing market is no exception. Things look very different than they did just...
Ready to Buy a Home? Why You Shouldn’t Wait
Have you been dreaming about eat-in kitchens and backyard patios? Do you spend hours perusing local real estate listings and researching neighborhoods? If you’re thinking about buying a home, you probably have a lot of questions and one of those might be, “Is now the right time to buy?” Every homebuyer’s situation is unique, but mortgage rates and property values continue to rise, so keep in mind that waiting could cost you.
If you think you might be ready to invest in your first home or buy a new home that better fits your lifestyle, consider the following:
Historically, interest rates right now are incredibly low. They’ve been steadily rising over the past two years, but they are still lower than average considering the country’s current state of economic growth. According to Forbes, interest rates for a 30-year fixed mortgage may reach 5.8% by the end of 2019. That’s a big jump from the current national average of 4.3%.
Forbes also reports that 2020 will be a huge year for millennial homebuyers, as many will be turning 30, an age when some consumers feel pressure to “settle down” and enter the real estate market. The increased number of potential homebuyers coupled with relatively flat inventory could cause home prices to rise. On average, the National Association of Realtors predicts home prices to rise about 3.1% over the next year.
So, how much will waiting to buy a home really cost you? By estimating the increased costs associated with higher mortgage rates and property values, homebuyers can calculate the cost of waiting to buy.
The Cost of Waiting
Say, for example, your dream home is priced at $200,000. If you were able to lock in an interest rate of 4.5% on a 30-year mortgage, your average monthly payment would be about $1,013. For simplicity’s sake, we’ll assume this consists solely of principal and interest and includes no down payment.
Now let’s assume you decide to wait a year to purchase a home. By this point, it’s likely that the value of your preferred home has increased 3% to a total of $206,000. And because mortgage interest rates have increased, your new interest rate is now 5.5%. That brings the new monthly payment (principal + interest) to $1,170. In this case, the cost of waiting one year to buy a home is $157 more per month. That might not seem like a lot at first, but consider what you’d be able to do or buy with that money each month. With an extra $39 a week ($157 divided by 4), you can treat yourself to a Friday night pizza and two movie tickets. Or, if you’re a fan of more regular indulgences, the $157 works out to about $5 per day — just the right amount for a morning coffee and breakfast sandwich!
And consider this: that extra $157 a month adds up to $1,884 annually. If you buy a home now instead of waiting, you’ll have nearly $2k extra in your pocket each year. Wondering how to use those funds? Here are a few examples. $1,884 can easily buy two plane tickets to Paris (about $500 each) and three nights in a three-star hotel (about $290 per night). Sounds like a fabulous long weekend, right? Alternatively, you could make some moderate home upgrades such as purchasing a new couch or furnishing a nursery.
Not quite convinced yet? Just look at the difference that a moderate increase in interest rate can make:
Now let’s take that additional $157 each month and think about it over the course of a 30-year mortgage. $157 x 12 months = $1,884. $1,884 x 30 years = $56,520. That’s a big number! If you take advantage of today’s home values and interest rates, then based on the projected increases we’ll likely see in just the next year, you’ll have an additional $56k in your pocket over the life of the mortgage!
If you buy a home when you’re around 30 years old, you’ll be nearing retirement age by the time you pay it off. You can use that extra money to pad your savings account (and perhaps even stop working a year early), or you could take a really amazing trip with a partner or friend. Anyone up for a three-month cruise around the world? Alternatively, you could gift the money to the NRDC or another favorite charity or help a child (or grandchild) pay for college. That extra money can be put to good use in so many ways — but only if you take advantage of today’s home prices and mortgage rates.homes for sale edmond ok, homes for sale in mustang ok, homes for sale in oklahoma city, homes for sale in yukon ok, oklahoma city homes, oklahoma city new homes