The Cost of Waiting to Buy a Home

Spring is upon us so you might be thinking about selling your house again. In Atlanta, we finally had the first year-over-year increase in five long years. How much values increased (if they did at all) in your neighborhood depends on your specific area of Atlanta, but most of us experienced a pop in value. So more homeowners are now contemplating selling for the first time since the financial crisis hit. At the same time there’s always that nagging question: “Should we wait and see if prices continue to rise?” The answer is, “probably not.” Let me illustrate by using some examples.

Let’s assume that prices will go up in Atlanta this year by 5% (many predict it will be over 10% but let’s be conservative). Further, we will assume that interest rates will go up 1% in that same period. These assumptions are based on predictions from the National Association of Realtors and various economic forecasters. Using this as our baseline, consider the following:

Sales price of your home today: $200,000

Sales price of your home in 1 YR: $210,000

Increase in Equity based on 5% gain: $10,000

Now let’s assume that the plan is to move up to a home in the low $300,000’s.

Sales price of new home today: $325,000

Sales price of new home in 1 YR: $341,250

Increase in Equity based on 5% gain: $16,250

Loss in Equity by Staying Put: $6,250

But it gets worse. Pretend that you’re planning to make a 10% down payment on your new home. Because it appreciated by 5% over the past year, the new sales price is $341,250. After making the 10% down payment, you would need a loan for $307,125. Consider the consequences of the increase in interest rates:

Payment on a loan of $292,500 @ 4.5% = $1,482

Payment on a loan of $307,125 @ 5.5% = $1,743

Increase in monthly payment: $261

Increase in payments over 10 years: $31,320

So, the cost of waiting one year in our example would be more than $30,000 over the next 10 years. Call us today so we can explore how to move you ahead of schedule and save you thousands!