Trying to purchase a home in a Seller’s market can be daunting to say the least; having to compete against multiple offers, offering to pay more than asking price, and taking risks to make a competitive offer in this market can be scary.
Many buyers can start to feel discouraged and may think about waiting until the market settles down to buy.
Let me bring you in on a secret: it’s not going to be any better a year from now or even two years from now.
Yes – the Seller’s market could potentially calm down a bit over the next year or so. But one major factor of a slow down would be interest rates going up. I’ve written before about why now is a great time to buy and the impact interest rates have on your monthly payments, but let’s dig in a bit deeper.
Below is a table from the 2020 Real Estate Forecast Summit predicting interest rates will go up from our current 2.83% to 3% this year and up again to 3.25% in 2022. And while home prices did go up over 15% in 2020 (wow!), they’re still going to get more expensive (even in a slower Seller’s market). Homes will be 8% more expensive by the end of 2021 and an additional 5.5% more expensive by the end of 2022.
To put this all into perspective:
- Today a $600,000 house purchased with 20% down at 2.83% interest would be roughly $2,475/mo ($890,981 total cost of mortgage).
- The end of 2021 the same house will cost $648,000. At 3% interest would be roughly $2,732/mo ($983,518 total cost of mortgage).
- The end of 2022 the same house will cost $683,640. At 3.25% interest the payment is roughly $2,975/mo ($1,071,088 total cost of mortgage).
Did you see the difference in the total cost of the mortgage? From $891k to almost $1.1 million! That’s over $200,000 you pay (over your 30 year loan) if you wait to buy the same house in 2 years vs. now. In contrast, if you purchase now, the 8% and 5.5% equity earned annually would be your future wealth ($83,640).
Buying a home is a smart investment. As you set goals for 2021, are you considering buying a home? If so, call me or reply to this email. I’d love to talk to you about the process and how to get clear about what you want for your future.
Warmly,
Arynne
PS: Not sure if you’re quite ready to buy your next home just yet? No problem. The sooner you start learning the ins and outs, the better. Click here to book a real estate possibility call with me today.
