You may be asking yourself “Should I buy now or wait? You are not alone! While it is no secret that mortgage rates are increasing, no one truly knows what the future holds for the housing market.
There are two questions you can ask yourself that can help you make the right decision:
Will home values be higher a year from now?
Will mortgage rates be higher a year from now?
Let’s see if we can shed some light on answers!
Will home values be higher a year from now?
If you average recent projections from a Major Industry Forcaster, the expectation is it will continue to rise between 6.6-10.3% in the next year. It is expected in 2022 that the demand for housing will continue and be as strong as it was in 2021.
Let’s take an example of a house valued at $350,000 today.
If the buyer makes a 10% down payment ($35,000), they’ll end up borrowing $315,000 for their mortgage. Applying a projected rate of home price appreciation of 8%, that same house will cost $378,000 next year. With a 10% down payment ($37,800), they’d then have to borrow $340,200.
Therefore, as a result of rising home prices alone, a prospective buyer will have to put down an additional $2,800 and borrow an additional $25,200 just for waiting a year to make their move.
Will interest rates be higher a year from now?
As of now, mortgage rates are floating around 3%. However, most experts believe they’ll rise as the economy continues to recover. Any inflation in the mortgage rate will also expand the purchaser’s cost. Those same industry forecasters also expect the interest rate for the first quarter of 2022 to be between 3.5-3.9% The projections average out to 3.6% among the forecasts, a jump up from where it is now.
What if both home prices and interest rates are higher?
A buyer will pay a lot more in mortgage payments each month if both of these variables increase. Assuming a buyer purchases a $350,000 home this year with a 30-year fixed-rate loan at 3% after making a 10% down payment, their monthly principal and interest payment would be $1,328.
That same home one year from now could be $378,000, and the mortgage rate could be 3.75% (based on the industry forecasts mentioned above). That monthly principal and interest payment, after putting down 10%, totals $1,576.
The difference in the monthly mortgage payment would be $248. That’s $2,976 more per year and $89,280 over the life of the loan.
Bottomline
When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year. Of course, there are other options to consider, too. The truth is, that nobody knows what the future holds for the housing market. And if you’re weighing your options, I would love to help! Let’s figure out the best option for you, contact me today!