To determine whether you should buy now or wait another year, you can ask yourself two simple questions:
Let’s shed some light on the answers to both of these questions.
Three major housing industry entities are projecting ongoing home price appreciation in 2022. Here are their forecasts:
According to the National Association of Realtors (NAR), the median price of a home today is $353,900. Using an average of the three price projections above (6.5%), a home that sold for $353,900 today would be valued at $376,904 at the end of next year. As a prospective buyer, you would therefore pay an additional $23,004 by waiting.
Today, Freddie Mac announced their 30-year fixed mortgage rate was at 3.1%. However, most experts believe mortgage rates will rise as the economy recovers. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
That averages out to 3.7% if you include all three forecasts. Any increase in mortgage rates will increase your costs.
If both variables increase, you’ll pay a lot more in mortgage payments each month. Let’s assume you purchase a $353,900 home today with a 30-year fixed-rate loan at 3.1% (the current rate from Freddie Mac) after making a 10% down payment. According to mortgagecalculator.net, your monthly mortgage payment would be approximately $1,360 (this does not include insurance, taxes, and other fees because those vary by location).
That same home one year from now could cost $376,904, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment after putting down 10%, would be approximately $1,561.The difference in your monthly mortgage payment would be $201. That’s $2,412 more per year and $72,360 over the life of the loan.
Add to that the approximately $23,004 a house with a similar value would build in home equity this year due to home price appreciation, and the total net worth increase you could gain by buying this year is over $95,364 (the $72,360 mortgage savings plus the $23,004 potential gain in equity if you buy now).
When asking if you should buy a home, you may think of the non-financial benefits of homeownership. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.