What will one year cost you?
All things being equal, if you were to purchase a home where the loan amount was $350,000 at the current average interest rate of 3%, your base mortgage payment without taxes and insurance would be $1,476 a month.
Wait just one year and that same home loan amount with the estimated national average increase in home prices of 7% will cost you $374,500. Calculate that with what most experts are saying will be at least a .5% increase in interest rates over the next 9-12 months, and your base monthly mortgage principal and interest payment will jump to $1,682.
That’s a 14% increase. (1,682 – 1,476 = 206) (206 / 1,476 = .13956) (.13956 x 100 = 13.956) or 14% rounded up.
If a 14 % loss of buying power in one year doesn’t seem like a lot, consider this. How would you feel if your employer said to you that they were going to cut your pay by 14% this next year but was going to expect you to do the same amount of work? And then to add insult to injury, said that they were also considering decreasing your pay by that same 14% for the next several years in a row as well.
OK, so maybe you think, I’ll just wait it out.
Unfortunately, most experts believe there won’t be a slowdown of any significance in home prices going up for quite some time due to the basic laws of supply and demand. For example, according to recent Inman News articles, we have had a 400,000 new home start shortfall for the last 14 years based on national historical data kept by the US Census Bureau. This goes back as far as 1959, leaving us 5.5M houses short which basically means we have between a 6 and 13 year supply deficit. For more detailed information about this, see the Inman News article in our Newsletter titled “Knowing New Construction Gives You A Competitive Edge — Here’s Why”
So if you’ve been considering buying a home but have hesitated because you believe the prices will start to level out anytime soon, please understand that the statistics just don’t support that belief and actually suggest otherwise.
What to do?
We can help, and we would love the opportunity to earn your business. With interest rates still at historical lows and home prices expected to increase for years to come, now is the time to buy. Let us help you navigate this very competitive seller’s market, employ valuable tricks of the trade to make your offers the most competitive possible (even beating out cash), as well as guide you on locations, types, and ages of homes where you can get the best bang for your buck.
For a free buyer consultation contact us at [email protected] or you can reach one of our Team Members by calling 678.631.1723.
By Tony Morris, Realtor
The Meridian Real Estate Group