Does It Make Sense to Wait This Market Out?
Waiting for prices to drop could end up costing you more.
As the year comes to a close, a lot of people have been telling us that they’d rather wait the market out until prices come down instead of making a move now. You're not wrong in thinking that way. Prices are at an all-time high. However, this argument is a little flawed.
The real question you should be pondering is, “When is the market going to turn?” A large drop in prices like we saw in 2008 isn’t common. If the market corrects in the near future, it won’t be nearly as drastic. Now, we have to look at current affordability despite the high prices.
Although everything seems to be overpriced there are opportunities for buyers with our current low interest rates. Let’s say you buy a $350,000 house this year with a 3% rate. Your monthly payment will be right around $1,400, and you’ll pay $172,000 in interest over the life of your loan.
"If prices come down and rates go up, your affordability will still decrease."
Now let’s see what would happen if you wait a year and that same home’s price drops to $325,000, but interest rates have gone up 1% to 4%. Your monthly payment now will be $1,475, and you’ll be paying $22,000 in interest. That’s $50,000 more you’ll spend by waiting for a “cheaper” home. It may seem like you’re overpaying now, but it won’t seem that way in a few years when you have that interest rate locked in and the market has cycled.
The second part of this is timing. If you're thinking about buying a house and only living in it for three to five years, you should probably wait. You’re not going to be living in the home long enough for the market cycle to come back around anyway.
We don’t have a crystal ball, but we do know that if prices come down and rates go up, your affordability will still decrease. Whether buying now or waiting is the best financial decision for you comes down to your personal situation and your goals.
If you have questions for us about your situation, the strategies you can use, or anything else related to real estate, don’t hesitate to reach out via phone or email. We look forward to hearing from you soon.