The Cost of Waiting Until 2018 to Buy

The Cost of Waiting Until 2018 to Buy

There’s quite a bit of uncertainty in the U.S. economy right now. Things are going all right – but many people are currently leaning towards a “wait and see” approach when it comes to big purchases, trying to gauge the state of the housing market and keep a close eye on interest rates, which have risen from the historic lows we saw a few months ago.

It is actually because of those last two points that we would argue that the time to start that home purchase is now. Why? It all comes down to the “cost of waiting to buy.”

This great blog post over at Keeping Current Matters does an excellent job of explaining the concept. In simplest terms, the “cost of waiting to buy” refers to the additional funds it would take to buy a home in the future, assuming an increase in interest rates and/or home prices over a period of time.

The current state of the market is a perfect illustration of the potential costs of waiting. Mortgage rates currently sit right around 4.2%. Freddie Mac projects that rates could bump up to around 4.8% by this time next year. Meanwhile, home prices are expected to appreciate by 4.8%, according to CoreLogic; this means that a home that costs $250k today may cost around $262k a year from now.

As Keeping Current Matters illustrates, these shifts mean not just a higher price and less purchasing power upfront, but a bump in what you can expect to pay per month or year in the long term: On that $250k house, you can expect your monthly mortgage payment to increase by roughly $152 a month. That adds up to you spending about $1800 more a year if you wait to buy than if you purchase a home soon.

Need more incentive? According to KCM, for every $250k you borrow, “your monthly mortgage payment will increase by $152.08 and the home price will increase by $12,000.” So if you’re looking at a $750k house right now? The cost of waiting until next year may be a $36,000 increase in price, and just about $456 every month in mortgage payments.

We don’t mean to scare you! Certainly, it’s important to remember that the Chicago market is a unique animal, and interest rates can be predicted and tracked, but they do fluctuate – sometimes even on a day to day level. The most important thing to take away? It’s almost always better to buy know, when you can be sure of interest rates, home prices, and your own financial situation; no one can know for a certainty what may happen over the course of 12 months, and you may well have just waited yourself out of that dream home.

Want to get started buying or selling in Chicago? Looking to talk strategy with a team of seasoned real estate experts? You’ve come to the right place! Drop us a line today to put the Real Group team to work for you!

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