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What If I Wait Until Next Year to Buy?



Keeping Current Matters published a very informative article today about the decision to wait another year to buy. The following is their article.

First-time homebuyers are flocking to the housing market in greater numbers than any time in the last few years. Renters who are ready and willing to buy are now realizing that they are also able to as well. Many first-time buyers are Millennials (born between 1981 – 1997).

If you are one of the many in this generation who sees your friends and family diving head first into the real estate market, and wonder if now is the time for you to do the same, keep reading!

The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.

Let’s look at an example of what the experts are predicting for the upcoming year, and what that really would mean for you. Let’s say you’re 30 and your dream house costs $250,000 today. Right now mortgage interest rates are at or about 4%.

Your monthly mortgage payment (principal & interest only) would be $1,193.54.


But you’re busy, you like your apartment, and moving is such a hassle. You decide to wait until next year to buy. CoreLogic predicts that home prices will appreciate by 5.1% in the next 12 months; this means that same house you loved now costs, $262,750.

Freddie Mac predicts that over this same period of time, interest rates will be a full point higher at 5.0%. Your new payment per month is now $1,410.50.

The difference in payment is $216.96 PER MONTH!


That’s basically like taking $8 and tossing it out the window EVERY DAY!

Or you could look at it this way:

That’s your morning coffee everyday on the way to work (average $2) with $10 left for lunch!
There goes Friday Sushi Night! ($50 x 4)
Stressed Out? How about a few deep tissue massages with tip!
Need a new car? You could get a brand new car for $217 a month.
Let’s look at that number annually! Over the course of your new mortgage at 5.0%, your annual additional cost would be $2,603.52!

Had your eye on a vacation in the Caribbean? How about a 2-week trip through Europe? Or maybe your new house could really use a deck for entertaining. We could come up with 100’s of ways to spend $2,603, and we’re sure you could too!

Over the course of your 30 year loan, now at age 61, hopefully you are ready to retire soon, you would have spent an additional $78,105.60, all because when you were 30 you thought moving in 2015 was such a hassle or loved your apartment too much to leave yet.

Or maybe there wasn’t an agent out there who educated you on the true cost of waiting a year. Maybe they thought you wouldn’t be ready. But if they showed you that you could save $78,000 you’d at least listen to what they had to say.

They say hindsight is 20/20, we’d like to think that 30 years from now when you are 60, looking back, you would say to buy now…

Buying is Cheaper Than Renting

Many factors go into deciding whether or not to purchase a home. But, if you are able to buy, it’s been proven to be the cheaper route. Trulia.com announced two weeks ago that in America’s 100 largest metropolitan areas, buying a home is more affordable than renting.  

 

Asking home prices have risen by 2.3% year over year, however, rents have risen more (4.7%). This means that home prices are lower relative to rents than they were a year ago.

Mortgage rates have also fallen. The best rates this summer have been around 3.5%, while last summer rates were closer to 4.5%. With rates that low, it makes home buying a powerful option.

 

There are several other factors to take into consideration when making these calculations, such as tax deductions and the length of time that you plan to remain in your home. You get the best savings by staying in your home seven years or longer. Seven years is the average amount of time a homeowner remains in their property, so for most people, this cost savings will be high.

 

The decision to rent or buy a home is very personal. There’s a strong emotional component: some people want the security of homeownership and others want the footloose freedom of renting. Affordability is at an all-time high and renting is no longer viable as the cheaper option. If you are able to buy a home, now is the time to do it!