Two Reasons Why Waiting To Buy a Home Will Cost You

<article class="post-112304 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-112304"><span class="entry-date">December 9, 2021</span><div class="entry-header center-block text-center"><h1 class="entry-title">Two Reasons Why Waiting To Buy a Home Will Cost You</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Two+Reasons+Why+Waiting+To+Buy+a+Home+Will+Cost+You&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Ftwo-reasons-why-waiting-to-buy-a-home-will-cost-you%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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<p><img alt="Two Reasons Why Waiting To Buy a Home Will Cost You | Simplifying The Market" class="webfeedsFeaturedVisual wp-post-image" decoding="async" link_thumbnail="" loading="lazy" sizes="auto, (max-width: 549px) 100vw, 549px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/08132109/20211209-KCM-Share-549×300.jpg" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/08132109/20211209-KCM-Share-549×300.jpg 549w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/08132109/20211209-KCM-Share.jpg 750w" style="display: block; margin-bottom: 5px; clear:both;max-width: 100%;" width="358"/></p>
<p>If you’re a homeowner who’s decided your current house no longer fits your needs, or a renter with a strong desire to become a homeowner, you may be hoping that waiting until next year could mean better market conditions to purchase a home.<span id="more-45625"></span></p>
<p>To determine whether you should buy now or wait another year, you can ask yourself two simple questions:</p>
<ol>
<li><strong>Where will home prices be a year from now?</strong></li>
<li><strong>Where will mortgage rates be a year from now?</strong></li>
</ol>
<p>Let’s shed some light on the answers to both of these questions.</p>
<h4><strong>Where Will Home Prices Be a Year from Now?</strong></h4>
<p>Three major housing industry entities are projecting ongoing home price appreciation in 2022. Here are their forecasts:</p>
<ul>
<li>
<a href="https://www.fanniemae.com/research-and-insights/forecast"><em>Fannie Mae</em></a>: 7.4%</li>
<li>
<a href="http://www.freddiemac.com/research/forecast/20211015_quarterly_economic_forecast.page?"><em>Freddie Mac</em></a>: 7%</li>
<li>
<a href="https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary"><em>Mortgage Bankers Association</em></a>: 5.1%</li>
</ul>
<p>According to the <em>National Association of Realtors </em>(NAR), the median price of a home today is <a href="https://www.nar.realtor/research-and-statistics">$353,900</a>. Using an average of the three price projections above (6.5%), a home that sold for $353,900 today would be valued at $376,904 at the end of next year. As a prospective buyer, you would therefore pay an additional $23,004 by waiting.</p>
<h4><strong>Where Will Mortgage Rates Be a Year from Now?</strong></h4>
<p>Today, <em>Freddie Mac</em> <a href="http://www.freddiemac.com/pmms/">announced</a> their 30-year fixed mortgage rate was at 3.1%. However, most experts believe mortgage rates will rise as the economy recovers. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:</p>
<ul>
<li>
<a href="https://www.fanniemae.com/research-and-insights/forecast"><em>Fannie Mae</em></a>: 3.4%</li>
<li>
<a href="http://www.freddiemac.com/research/forecast/20211015_quarterly_economic_forecast.page?"><em>Freddie Mac</em></a>: 3.7%</li>
<li>
<a href="https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary"><em>Mortgage Bankers Association</em></a>: 4%</li>
</ul>
<p>That averages out to 3.7% if you include all three forecasts. Any increase in mortgage rates will increase your costs.</p>
<h4><strong>What Does It Mean for You if Home Values and Mortgage Rates Increase?</strong></h4>
<p>If both variables increase, you’ll pay a lot more in mortgage payments each month. Let’s assume you purchase a $353,900 home today with a 30-year fixed-rate loan at 3.1% (the current rate from <em>Freddie Mac</em>) after making a 10% down payment. According to <a href="https://www.mortgagecalculator.net/"><em>mortgagecalculator.net</em></a>, your monthly mortgage payment would be approximately $1,360 (this does not include insurance, taxes, and other fees because those vary by location).</p>
<p>That same home one year from now could cost $376,904, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment after putting down 10%, would be approximately $1,561.<a href="https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/09123547/20211209-MEM-Eng-01.png"><img alt="Two Reasons Why Waiting To Buy a Home Will Cost You | Simplifying The Market" class="aligncenter wp-image-45647" decoding="async" height="488" loading="lazy" sizes="auto, (max-width: 650px) 100vw, 650px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/09123547/20211209-MEM-Eng-01.png" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/09123547/20211209-MEM-Eng-01.png 1000w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/12/09123547/20211209-MEM-Eng-01-400×300.png 400w" width="650"/></a><strong>The difference in your monthly mortgage payment would be $201. That’s $2,412 more per year and $72,360 over the life of the loan.</strong></p>
<p>Add to that the approximately $23,004 a house with a similar value would build in home equity this year due to home price appreciation, and the total net worth increase you could gain by buying this year is over $95,364 <em>(the $72,360 mortgage savings plus the $23,004 potential gain in equity if you buy now)</em>.</p>
<h3><strong>Bottom Line</strong></h3>
<p>When asking <em>if you should buy a home</em>, you may think of the <a href="https://www.simplifyingthemarket.com/2021/05/03/americans-find-the-nonfinancial-benefits-of-homeownership-most-valuable/?a=712984-fa409495d5d70154d03a25e81e9540e2">non-financial benefits</a> of homeownership. When asking <em>when to buy</em>, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.</p>
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