If you’re a renter with a desire to become a homeowner, or a homeowner who’s decided your current house no longer fits your needs, you may be hoping that waiting a year might mean better market conditions to purchase a home.
To determine if you should buy now or wait, you need to ask yourself two simple questions:
- What will home prices be like in 2022?
- Where will mortgage rates be by the end of 2022?
Let’s shed some light on the answers to both of these questions.
What will home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:
Using the average of the three projections (6.27%), a home that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait.
Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.
What does it mean for you if both home values and mortgage rates rise?
You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.
That same home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166.
The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.
If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.
When asking if you should buy a home, you probably think of the non-financial benefits of owning a home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
Find Your Next Home
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If you’re reading this late at night and want to start now, first send me an email, then focus on these items of the home buying process: 1) Download my Home Buyers Guide to learn general information (if you’re into doing your own research). 2) Talk to a quality mortgage lender and get pre-approved for financing. 3) Search for homes currently on the market to get a feel for the types of homes, locations, and price points available. 4) Read my Denver real estate blog (updated daily!) to further educate yourself about the market and relevant topics for home buyers. And of course, when in doubt, just call me and I will help you with each step of your journey.
When It Is Time To Sell Your Home
Find out how much your home is worth and download my free guide for home sellers for helpful information. It is important to choose a REALTOR® who can develop an effective marketing strategy for your property, negotiate well on your behalf, and has the knowledge to provide an accurate market comparison so you can determine the right asking price. The market changes each week and your asking price is an important component of your selling strategy. I am here to listen and serve. I will share how your home stacks up against the competition, or how we can position your property to sell quickly and for a good price, or talk through any unique circumstances or goals. Contact me today to start a discussion…
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