What is the cost of waiting to buy your new home?
Whether your are a long time renter looking for your first home or perhaps your current home no longer meets your needs and you are looking to upgrade, you may be asking yourself if now is the right time to buy? In 2021, the real estate market was highly competitive due to short supply and strong demand. Additionally, home prices have continued to rise as well as mortgage rates, a trend that will continue into 2022.
So what is the cost of waiting to buy?
Home values skyrocketed by nearly 20% in 2021, according to the most recent data by the S&P Case-Shiller national index of home prices. While most experts believe the that home values will slow down in 2022, you still could be paying much more just by waiting. Using an average of price projections (6.5%), a home that sold recently in late 2021 for $353,900, would be valued at $376,904 at the end of 2022. As a prospective buyer, you would therefore pay an additional $23,004 just by waiting.
Waiting for mortgage rates to go down probably won’t do you any favors, either. Mortgage professionals expect rates to go up in 2022. In fact, today’s mortgage rates are also about 1% higher than they were this time one year ago. Experts say several economic factors are pushing interest rates up this year: The Bureau of Labor Statistics (BLS) reported recently that inflation climbed again in February and is the highest in four decades at 7.9% year-over-year. Expectations are that the Federal Reserve will start raising its benchmark short-term interest rate in March to address the high inflation.
What this means for spring 2022 homebuyers is that 1% difference in mortgage rates (combined with rising housing prices) will eat into your buying power compared to last year.
Despite all this, experts tend to agree not to time the rate market and buy when the time is right for you. Experts also point out that these 4%+ rates we are seeing right now are still considered favorable from a historical perspective. It was only a few short years ago when a “good rate” was around 5%.
The bottom line:
When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.