The Cost Of Waiting

The Cost Of Waiting


WHEN IS THE BEST TIME TO PURCHASE A HOME?




The answer to this question is similar to the answer to the question “when is the best time to plant a tree?”

  • The best time to plant a tree was 20 years ago.

  • The best time to buy a house was in 2012 when interest rates were *3.66% and the median home price in the Baltimore Metro Area was *$230,000.

The real question is… Is now a good time to buy a home?

THE ANSWER IS YES!

Let me explain why NOW is the time to purchase.   We will look at the numbers we know from 2017 and 2018 and then we will look at a prediction for the future.

So here is a scenario. It is late 2017 and you are contemplating a move. The median home price is $259,000 in the Baltimore Metro Area and, according to Freddie Mac, the average 30-year mortgage rate is 3.99%. At that point you decide to hold off and continue with the status quo.

But, in 2018, you decide to make the move.


HOW MUCH DID DELAYING THAT DECISION FOR JUST 1 YEAR COST YOU?

$119.10 PER MONTH

What caused that payment to go up? During the year of waiting, the median home price in the Baltimore Metro Area rose 2.70% to $266,000 and the average interest rate rose to 4.54%. A combination of the market appreciation and the rise in interest rates forced the monthly payment up. Breaking it down further, the rise in the interest rate alone cost $84.00/month and the market appreciation cost the balance of $35/month.

Unfortunately, that $119/month doesn’t go away anytime soon.  Over a five-year period that delay is going to cost you $7,145.90. WOW!


WHAT IS GOING TO HAPPEN IN 2019?


The cost of money will continue to rise. With economic confidence high, the 10-year treasury bonds yields will continue to increase. According to Freddie Mac’s US Economic and Housing Marketing Outlook the average interest rate on a 30-year mortgage is intended to rise to 5.3%! HOLY MOLEY

The value of homes will go up.  Since 1998, homes in the Baltimore Metro Area have increased in value at an annual average of 3.87%/year.  Since the low point in 2011, homes values have increased by an average of 2.75%/year. Right now, the supply of homes is at a 10-year low. 1000’s of new listings would need to come on the market immediately to shift the market from a seller’s market to a buyer’s market.

The other hidden cost that we haven’t touched on yet is the loss of principal pay down on your mortgage , but I will save that is a story for another day.

So, what's the bottom line…


WAITING IS EXPENSIVE

If someone you know is considering "planting" themselves in a new home, please share this blog and my phone number with them.



Median Home Price in the Baltimore Metro according to MarketStats

2018 - 266000

2017 - 259000

2016 - 250000

Interest Rate according Freddie Mac

2016 - 3.65%

2017 - 3.99%

2018 - 4.54%

2019 -5.3%


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Phone: 410-920-4760
Dated: February 6th 2019
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