In this uncertain real estate market, many buyers may be playing the waiting game when it comes to purchasing a home. There are advantages and disadvantages to this strategy. Waiting could mean you have more time to save for a larger down payment. Waiting could also mean you end up paying more interest, and your rent payment is not building you any equity. Let’s break down the cost of waiting to buy a home.
Interest rates are at historic lows! Lower interest rates mean lower payments. This has prompted a surge in mortgage refinances. In addition, serious buyers are moving forward with their home search amid these uncertain economic times.
In the past few years, home prices have been on a steady incline as inventory has been dwindling. Utilizing the “wait and see” approach to house hunting may not work in your favor. Waiting even a few months to purchase could decrease your purchasing power.
If you are looking to sell your home and purchase another, you also may be inclined to wait to see how much your home will appreciate. Something to consider is a higher selling price, the number of buyers that can afford your house potentially decreases. Also, as your current home’s value increases, so does the price of the houses you are looking to buy.
“As your current home’s value increases, so does the price of the houses you’re looking to buy.”
Along with interest rates, inventory was at a two-year low in January 2020, according to Housing Wire. Atlanta Realtors Association president, Jennifer Pino, told USA Today the Atlanta market was at a two-month supply level before the pandemic started. With low supply, demand typically goes up along with the prices.
As rates increase, your purchasing power decreases. For every .50% increase in interest rates, your purchasing power decreases by 6%!
In the example below, we look at a home with a sales price of $400,000. With a 10% down payment, an interest rate of 3%, APR of 3.43% on a 30-year fixed loan, the monthly payment is $1518.00. If you wait to buy a home, you risk the rates increasing .50%. If that happens, your purchase power goes down almost $25,000.
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