Thought about buying in 2021, but are holding off? Maybe you want to save up for a bigger down payment, wait for your promotion, or believe that the market is going to shift this year (it’s not…more on that in another post). Waiting until 2022 could cost you $85,125. Let me explain:
Let’s use this great graphic from Keeping Current Matters for reference:
If you were buying a $350,000 home with a 10% down 30-year mortgage, that same home a year from now will cost you a lot more. $85,125 to be exact. How is that possible?
Price: Home prices are forecast to go up 6% this year. That raises the price of that $350,000 home by $20,650 to $370,650.
Down Payment: Your 10% down payment is reflective of the purchase price. That 6% increase raises it by $2,065.
Interest Rates: Rates are rising this year. In fact, rates have already risen since Keeping Current Matters put out this graphic. Between the higher price and higher interest rate, your monthly payment has now gone up by $116. Over 30 years, that adds up to $41,760.
Lost Equity: You also have the opportunity cost. What does that mean? If you had bought the house at the beginning of 2021, by 2022 you would have gained $20,650 in equity due to the home’s value increasing. You didn’t though, so you missed out. In fact, you actually have to pay $20,650 more because that’s how much more the home is worth. So that’s $20,650 you have to pay, plus another $20,650 you missed out on, adding up to a net $41,300 difference.
When all is said and done…$81,125.
I posted a video about this last week, and a few people commented or spoke with me about how these numbers aren’t relevant if the market crashes, foreclosures flood the market, etc. If anyone has been following the data over the last year, and comparing it to the data from past recessions and housing crashes, it’s like night and day. My next video and post will cover the data in more detail so you can come to your own conclusion. In the meantime, if you’re buying your forever home, now is the time to do it.