Buy Now or Wait
Every day, we get to have interesting conversations with people about real estate, the market, what’s going to happen, and interest rates.
Today, we had a conversation with someone currently renting, and he said you know what, I’ve been advised to wait six months because interest rates will go down, so I’m better off if I do that.
I thought, are you? And I took a look at the situation.
If that person bought a house for $600,000, put 20% down, got a 5.19% interest rate, and paid $2,000 in property taxes, his monthly payment would be $3,010. The total costs for the next 12 months would be $36,120.
Of course, while he’s paying that mortgage, he’s building some equity. He would build $9,706 in equity. If you look at his cost less that equity, his net cost for the year is going to be $26,414.
Let’s look at what happens if he waits. He’s going to pay that rent for another six minutes. So at $2,700 a month, that’s $16,200. When he goes to buy the house, so here’s the thing: if interest rates start to drop as people believe they will in July, then the house price will go up.
I conservatively said we will see a 3% increase in housing prices, and interest rates will start to drop because there’s still such a demand for homes.
The cost of that house is going to go up to $618,000. Still, 20% down, 1% less in interest rates. And we don’t know that that’s going to happen, but let’s just say, for argument’s sake, a 4.19% interest rate, only six months of property taxes, then the money.
The monthly cost is going to be $2741. In six months, that’s going to be $16,446. The total of six months’ rent and six months’ mortgage is $32,646. That’s less than if he bought it right now. However, he won’t build the same kind of equity in six months as in a year. So, the equity drops to $4123. The net cost for that person, Thank you, is $28,523 versus $26,000. It will cost more to wait, and we must remember one essential thing: This house is now worth $618,000.
So, the early buyer got another $18,000 in wealth by not waiting that six months. I’d love to hear what you think about this. If you’re ready now, buy now. Contact us and let me know what you think.
