Why Waiting to Buy a Home Could Cost You Big Time

Why waiting to purchase a home right now could be the most expensive decision you've ever made on this episode of Ryan and Real Estate. Welcome back to this episode of Ryan and Real Estate. If you've not been with us before, you've never seen our channel, check this out. Thank you so much for stopping by. Really appreciate it. If you take a minute, subscribe to the channel, leave us a comment, leave us your thoughts. Even if you don't agree with us, we'd love to hear what you have to say. Now, interest rates are still high for the last probably 10 years or so. But overall, again, as we've talked about before, they are relatively low comparatively for the rest of the history of home pricing. But are interest rates stopping you from right now deciding to make a purchase? Maybe you're thinking, you've heard about the Fed rates coming, you think that's going to help lower the 30-year fix, which doesn't have a direct correlation to the mortgage 30-year fix. But that's slowing you down from deciding if you're going to purchase a home now or wait till maybe next year when the rate's lower. Well, I'm going to tell you today how you waiting could cost you tens of thousands of dollars. I'm going to do the math for you. Break it down so you can see. You've always heard the cliche statement out there, date the rate, marry the house. I'm going to show you how that actually plays out. Now, again, I'm not saying buying a home is right now, everyone should do it if you're thinking about buying. But if you're in a spot where you are thinking about doing it the next year, I want to break it down so you can kind of see how this all plays out and how it could actually be costing you tens of thousands of dollars. What is the actual cost it's going to cost you to wait to purchase maybe this year versus the next couple of years? All right. Well, first, let's look at what is home appreciation, where home price is actually gone. Let's take an example neighborhood outside of Houston here in Siena, 2019. The average median price for a home was $325 in the neighborhood of Siena. Since then, six years later, that has increased to $440,000. That means the prices have gone up 26%, average about 5% a year. So let's take the math now. Let's say you're wanting to buy a home today, but you're deciding whether you want to wait for the rates to go down. Okay. $500,000 home. Here's an example. And let's pull up what that would look like in a mortgage calculator. All right. With that $500,000 home, including property taxes, insurance, PMI, HOA, all that stuff, it comes out with the current interest rate, 6.5%, to be $3,789 a month. So that's how it's going to impact from a monthly standpoint. Now let's look at what if you bought this house a couple of years later, but now the house is now worth 550, because we've had that 10% appreciation and we'll lower the interest rates. Let's even say a point, put it 5.5%. Your monthly payment actually goes up 50, 60 bucks, even though your interest rate went down 1%. And the worst thing of all is you have now lost $55,000 in equity and down payment from the reason that you wanted to wait for interest rates to get lower. And crazy enough, it's going to take you 25 years for you to recoup the amount of equity that you lost because you didn't purchase before that appreciation went up. I'm going to break it down to you in a cost of waiting calculator so you can see this. If you look at your purchase price by now, 500,000 by later 550,000, that's an increased cost to you of $50,000. The down payment is increased cost of $5,000. The loan amount is higher. The interest you're going to pay over time is higher. And all that was because you were waiting for interest rates to maybe lower 1%. Maybe you're out there and you're hoping they're going to drop down two, 3%. It would be what I would take the biggest gamble on, but it may happen. All right, there you go. That sums it up for you to understand there is significant cost in you waiting. And if you look over the history of the course of home prices, home prices have always gone up. Maybe not year to year, but if you look from 1963 to which is when we started tracking that till now, home prices have always gone up. So the question you need to ask yourself is your goal to have a lower interest rate or is your goal to get in in a good price now and allow your home to appreciate over time, which will in the end put more dollars in your pocket. Now home prices could go down and this is irrelevant at that point, but betting on what home prices have done over years, betting on the supply, the demand, what has happened even in the last few years, my bet is that home prices will continue to rise. And if you look at the experts who make predictions for what will happen with home prices, they're still expecting a four to 5% home appreciation in the next four to five years. So that means if you can get in now, you can take advantage of that appreciation. There you have it. There's my math. Maybe you agree, maybe you don't. If you don't feel free to put a comment there. I'd love to hear what you think. Maybe you're agreeing. You're like thumbs up. That's great, Ryan. I really appreciate the reminder. Otherwise, have a great time. We'll see you next time on Ryan and Real Estate.