Is now the best time to buy a home?
Talk about the potential for an ultimate case of buyer’s remorse. Is now the best time to buy a home? Ask any real estate agent, and without exception, the answer will be “now.” Of course that makes logical sense. Real estate agents earn their incomes from home sales. But, is now truly the best me to buy a home in Solano County?
Traditional thoughts about buying a home
Most everyone aspires to buy a home. There are well-documented cases when it makes sense to rent; getting a career established or wanting to remain mobile, for example. However, renting is much more costly in the long run as renters receive no financial incentives while paying out money. There are no rental write offs, except for the owner of the property, who receives both monthly income as well as distinct tax advantages.
Ultimately, it makes sense to buy a home if at all possible. Aside from the tax benefits, home ownership results in added equity as the loan is paid down, in addition to the expected and normally realized increase in a home’s value. So, while buying a home makes financial sense, it does not mean that completing the transaction is easy or that there are not any challenges. So what does the current real estate landscape look like? Are there suggestions that point to buying now or waiting?
The current real estate setting for home buyers
The statistics are sobering. Prices in Solano County may mimic national trends, as all U.S. property markets with few exceptions have headed up since the great recession of 2008. However, the local home appreciation rate is far more pronounced than most other locations across the nation. For those buyers who wait, the reality of finding sought-after deals is diminishing rapidly.
That means home prices are only going to go higher, as well as the predicted corresponding spike in interest rates as the economy continues to get better. As is the daunting case in the majority of the Bay Area, many individuals and families will be priced out of the areas they are living in, in as short a time frame of three to 12 months. Ultimately, now is the most affordable most of us will see real estate in our lifetimes when prices and interest rates are jointly considered. Buying now will lock in low rates with corresponding low payments, and give buyers a head start on increasing home prices.
The high cost of waiting to buy a home
Many individuals may severely underestimate the cost of delaying a home purchase. For example: A $300,000 home, with a traditional 30-year mortgage at 4% interest would cost approximately $1432 in principle and interest per month. If during the waiting period, the interest rate rose to 4.5% – which is completely feasible – the monthly payment would rise by almost $100 to $1520. That does not sound like much overall, but the total cost of the loan would rise from $515,609 to $547,220, an increase of in excess of $31,000 in overall interest payments.
And keep in mind. The previous estimates are for monthly payments for the same property cost. As noted in Solano County, home values have recovered quickly from the recent great recession. In many instances, sellers are asking for very aggressive home sales prices leading to double-digit appreciation in less than six months.
So, does it make sense to wait? In most cases, absolutely not. With unpredictable interest rates combined with climbing home values, waiting directly equates to more money out of the buyer’s pocket. As illustrated, even a relatively little bit each month can add up to a substantial amount over the life of the loan.