Uncategorized February 17, 2024

The Risk of Delaying Homeownership with Rising Home Prices

Are you dreaming of owning your own home? Maybe you’re waiting for the perfect time, but have you considered the risk of waiting too long? One important factor to consider is mortgage interest rates. Let’s explore why waiting might not be the best idea, especially with increasing home prices and interest rates.  Most experts have predicted that interest rates will go down this year, but that hasn’t happened so far.  In fact, rates have risen slightly.

First things first, what are mortgage interest rates? Well, they’re like the price tag on borrowing money from the bank to buy a house. When you take out a mortgage, the bank lends you money, but they charge you interest on that loan. So, the higher the interest rate, the more you’ll pay in the long run.

Now, let’s talk about home prices. On average, home prices tend to increase by about 4% each year. That might not seem like a lot, but it can add up quickly. For example, if you’re looking at a home that costs $200,000 today, it could be worth $208,000 next year if prices go up by 4%.

So, what does this have to do with waiting to buy a home? Well, here’s the thing: while you’re waiting for interest rates to drop, home prices could be going up. And if interest rates do drop, it might not make much of a difference if home prices have gone up even more.

Let’s break it down with an example. Say you’re looking at that $200,000 home, and you’re waiting for interest rates to drop before you buy. But while you’re waiting, home prices go up by 4%. Now, that same home is worth $208,000. Even if interest rates do drop, you might end up paying more for the home because the price has gone up.

Plus, there’s no guarantee that interest rates will drop anytime soon. They’re influenced by a lot of factors, like the economy, inflation, and government policies. So, while you’re waiting for the perfect moment, you could miss out on the opportunity to buy a home altogether.

But what if interest rates do drop? Wouldn’t it be better to wait for a lower rate? Well, not necessarily. Even if interest rates drop, you would probable be better off to buy now, then refinance to the lower rate. And if you wait too long, interest rates could start going back up again, which means you’ll end up paying even more in the long run.

Trying to time the market to find the very best time to buy is always risky and you lose the opportunity to earn equity while you are sitting on the sidelines.  So, what’s the bottom line? Don’t wait too long to buy a home. While it’s tempting to hold out for lower interest rates, you could end up paying more in the long run if home prices continue to rise. Instead, focus on finding a home that fits your budget and your needs, and don’t let the fear of interest rates hold you back. After all, owning your own home is a dream worth pursuing, no matter what the interest rates are.

To learn more, reach out to me a jimmcdonner@coldwellbankerhmf.com.  You can also sign up for an account at my website to search and save homes you may be interested in, https://jimmcdonnerrealtor.com.