For all the gloom-saying about the housing market – e.g., interest rates too high, prices too high – there are sound reasons for a would-be buyer to make their move sooner rather than later. Let’s look at a scenario for purchasing a $750,000 home. For a buyer who can start with a 20% downpayment, and buy today compared to waiting a year, you stand to benefit to the tune of $31,124 in just one year. Here’s how: At current interest rates for a 30-year loan, your monthly mortgage would be $4,525. If you waited a year and interest rates ultimately declined by 1%, your monthly payment would be $4,327, or $198 less per month. At first blush, it looks like the person who waits is the winner, but not so fast. Based on industry forecasts, a buyer today will see their home appreciate 5% in value over the course of 12 months, or $37,500. So, while waiting may have saved you $2,376 in annual mortgage payments, you missed out on all the appreciation. Today’s buyer can also refinance one year from now (at an estimated upfront fee of $4,000) to get to the lower monthly payment. The final equation looks like this: $37,500 appreciation gain- $2,376 in extra monthly costs for the first year of the mortgage- 4,000 in refinance costs = $31,124 net benefit for buying now Then there’s another scenario to consider: you wait 12 months, but interest rates don’t change. That means you missed out on one year of building home value, and perhaps most importantly, living in the home that you really want.
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