The Cost of Waiting to Purchase a New Home

Waiting to buy may not be your best option. Here is why.

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What is the cost of waiting to purchase a home right now? Today I am going to look at this for both first-time and move-up buyers and what it equates to when it comes to your pocketbook.

If you are contemplating purchasing a home, you should know that it is a scarce inventory market. There aren't a lot of options available. For this reason, I wanted to arm you with some good information to make sure you understand how this can relate to your bank account at the end of the month and beyond.

Let’s say we’re working off a home price of $500,000. As of August 2018 in the greater Puget Sound area, the average interest rate is about 4.57% if you put down 20% on a 30-year loan. This means that your payment, if you bought a $500,000 home today, would be $2,554 per month.

From now to next year, CoreLogic is projecting that we will see a 5.3% increase in home values. I think that this is reasonable given that the average yearly appreciation of home values has been about 5% going all the way back to World War II.

With a 5.3% increase, that $500,000 home will be worth $526,500 in just a year.

The average yearly appreciation of home values has been about 5% going all the way back to World War II.

Freddie Mac is projecting that interest rates are going to be at 5.1% by the third quarter of 2019. That would increase your payment from just over $2,500 to $2,858.63. This is a $304 per month difference in the cost of purchasing the exact same home at different times.

I consider $304 to be a significant amount and it could really make a difference if you look at the annual amount of $3,652. You could either save that money or invest it and make an exponentially larger impact on your financial state years down the road by acting sooner rather than later. If you look at it over 30 years for how much you are paying extra, it is $109,000.

If you are a move-up buyer, meaning you own a home that is less expensive than the house that you want to move into, the gap actually grows. For example, if you have a 5% increase in your $300,000 existing house and you want to buy a $500,000 home, the increase is going to be much larger for the larger home. From there, the gap grows further.

I want to help you find your next best step. If you have any questions about this or are interested in buying or selling, please feel free to contact me. I look forward to speaking with you soon.