Should you wait to buy a house? Let's find out what it may cost you!

A lot of would-be buyers have been on the sidelines waiting for better rates. In this post we will break down the numbers and show you that it may actually cost you a lot more than you think to wait for lower rates.

You've probably heard the saying "Marry the house, date the rate"

For those who are thinking about waiting to buy a house or sell and buy in order for rates to come down, I’ve got some interesting numbers that I think folks will want to hear to factor into the equation. You could be leaving thousands and thousands of dollars on the table and it could actually cost you more in the long run and I’m gonna tell you why. I’m going  break down the numbers so you can see and then factor this into your thought process.

You’re probably wondering how could that be that it’s gonna cost me more money, well first we need to look at what your potential savings are if you wait for a lower rate. So currently rates are in the mid 6% range, so let’s say 6 to 12 months from now rates are a half a percent lower let’s say they’re 6%. The average savings on a $500,000 home that you put $100,000 or 20% down you’ve got a $400,000 loan principal, the savings of getting a half a percent lower are around $1500-1600 a year. Now that’s great however let’s think about what else happens in the next 6 to 12 months. Well first home prices look like they’re likely to notch upward. In addition to that there’s also appreciation, let’s say you bought the home now, historically it’s likely to appreciate between 3-5% over the course of that year.

Lets break down what those numbers look like: $1500 savings by waiting. Let’s say you buy the home now. Over the course of the year if your home appreciates 3% for the value of the home I gave, thats about $15,000 in appreciation. Now you’ve also got mortgage interest tax deduction to factor in. You’re also likely paying more by waiting so it’s kind of a double whammy and I think it’s important that people think about this when they’re wanting to wait for lower rates. There’s a chance that it’s going to actually cost you more and you’re going to give up the opportunity cost of the value you’re going to gain in appreciation over that time.

And now I know some people are going to say well, The savings are $1500 with a half percent lower rate. What about the overall cost of the loan over the 30 year term? That is significant you know in the ballpark of $50,000 over the life of the loan by getting a half a percent lower rate, but let’s be honest most people only stay in their home 2 to 5 years or they refinance in that time. Which is why we have the saying Marry the house date the rate and obviously a lot of these details numbers rates etc. depend on what actually happens over the course of 2024.

Are rates gonna go back up are they gonna come back down? Are home price is gonna stay sideways are they going to increase and by how much? A lot of that is going to depend on the Outlook, which once we get the fed and see what they’re going to do this year that’ll be the end of this month while a much better sense of if and when we expect Rate cuts, we also need to look at the demand picture, but generally we’re not expecting a lot of change. We don’t expect a huge surge in inventory which would theoretically bring prices down. We also don’t see major rate cuts this year. It could take until close to the end of 2024, 2025 before we may see rates somewhere in the 5% range or at least below 6% so a lot of things to factor in here. 

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