Should I Buy A Home Now?
To Buy Or Not To Buy?...That is the question
The depth of emotion and logic involved in the contemplation of buying a home in this market is quite profound, so I think it works well when relating it to a Shakespeare. This article is a gift of perspective, and you will find logic concluding the direction to the like of that Magic Eight Ball’s triangular counsel, “All Signs Point to Yes”.
Navigating the Signs
Mortgage rates are headed north. The Fed has clearly laid out their intent of continuing to raise interest rates. The Fed has raised interest rates three times since December of 2016 (less than a year), and each time a quarter point. This means that if you bought during the summer of 2016, your payment on a $350,000 mortgage was about $160 per month less than if you bought today.
Home values are going up with only a few signs of letting up. Today, supply is down as found in the many articles related to how few homes are actually for sale. There are so many reports with different numbers on the average appreciation, so I took an average of what I have read. Home values in Denver have increased in value about 10% since one year ago. On a $350,000 home, that means you will will pay $35,000 more for the same home today than you would have paid one year ago.
Navigating the Cost
op - por - tu - ni - ty cost
The loss of potential gain from other
alternatives when one alternative is
Simply stated, an opportunity cost is the cost of a missed opportunity. It is the opposite of the benefit that would have been gained had an action, not taken, been taken. To determine the estimated cost of waiting to buy, the opportunity cost must be given value and inherent in the calculation. The scenario below is not of any guarantee, but more designed as a simple template for consideration.
I am using the $350,000 home purchase price discussed above, while not including a down payment for ease of understanding. This virtual and estimated scenario is a 'what if I wait to buy for two years'...
What Does This Mean?
That total is quite staggering and would have one absolutely lean to buying now vs later. The idea here though is not in the actual number itself, but rather a way to help gauge the pro's and con's. This result here implies that you have a substantial amount of room to clear the risk of negative consequence if you decide to buy now.
Hopefully this perspective offers some insight and guidance in the decision on whether to buy now.