In this uncertain real estate market, many buyers may be playing the waiting game when it comes to purchasing a home. There are advantages and disadvantages to this strategy. Waiting could mean you have more time to save for a larger down payment but waiting may also impact result in a higher interest rate as the market moves. Interest rates are at historic lows! Lower interest rates may mean lower payments.
In the past few years, home prices in many areas have been on a steady incline as inventory has dwindled. Utilizing the “wait and see” approach to house hunting may not work in your favor. Waiting even a few months to purchase could decrease your purchasing power due to rising home prices.
If you are looking to sell your home and purchase another, you also may be inclined to wait to see how much your home will appreciate. Something to consider is a higher selling price, the number of buyers that can afford your house potentially decreases. Also, as your current home’s value increases, so does the price of the houses you are looking to buy. Along with interest rates, inventory is at a two-year low. With low supply, demand typically goes up along with the prices. As rates increase, your purchasing power decreases. For every .50% increase in interest rates, your purchasing power decreases by 6%! If we look at a home with a sales price of $400,000. With a 10% down payment, an interest rate of 3%, APR of 3.43% on a 30-year fixed loan, the monthly payment for principal and interest is $1518.00.* If you wait to buy a home, you risk the rates increasing .50%. To keep the same payment and loan terms at the higher rate, you must lower the sales price by almost $25,000.
