WAITING TO BUY A HOME COULD COST YOU OVER $100,000! (here are two reasons why)
Reason #1: POTENTIAL 5%-10% INCREASE IN HOME PRICES
During the past year, home prices have risen by approx. 20%+ in many markets. This means that it will likely cost you approx.:
- $600,000 to buy a home you could have purchased a year ago for $500,000
- $1,200,000 for a home you could have purchased a year ago for $1,000,000
While 20%+ annual increases in home prices are unlikely, a more reasonable scenario is that home prices may rise by 5% – 10% in the coming year. That’s because supply is likely to remain low and demand is likely to remain high. If home prices only go up by 5%, you may lose another $30,000 – $60,000 if you wait, depending on your price range. That’s because you’d likely need to pay:
- $630,000 for a home you could have purchased today for $600,000
- $1,260,000 for a home you have purchased today for $1,200,000
Reason #2: LIKELY INCREASE IN INTEREST RATES
Interest rates are largely expected to go up by approx. 1% over the coming year. That’s because the Federal Reserve will be phasing out its massive bond-buying program by mid-2022. Since March 2020, when Covid first hit the economy, the Fed has purchased a whopping $2.6 trillion of mortgage bonds, representing over 60% of all the mortgages issued since then. This had the impact of driving mortgage rates down to all-time lows. When the Fed phases out its bond-buying program, it’s likely that interest rates will return to the levels they were before the Fed got involved. That’s why rates are expected to be approx. 1% higher over the coming year. For example, on a $500,000 mortgage, a 1% increase in interest rates could cost you over $100,000 over the life of your mortgage.
Number of the Week: 3.84%
THAT’S THE AVERAGE ANNUAL GROWTH IN HOUSE PRICES FROM 1989-2019
(not even counting the 20%+ annual appreciation rates of the past two years).