The Cost of Waiting

If you're looking to become a new homeowner, here's how waiting to purchase could cost you quite a bit of money. 

Home Appreciation

If you have been active in the current market you'll be very familiar with how competitive it is for buyers. In fact, here is San Diego we have seen an increase of 15% in home value year over year. 

For a San Diego median home value around $800,000, that's an increase of $120,000! While we are not projecting 15% increases over the next year, we are projecting a sizable appreciation. Supply and demand is still skewed to favor the seller so we could very well see 5-8% increases. Here is what the three major houing industries are projecting for 2022.

Freddie Mac: 5.3%

Fannie Mae: 5.1%

Mortgage Bankers Association 8.4%

These are also national US projections. California and San Diego typically run above the national average for home appreciation. However, even if we only take the average projection and apply it to the current San Diego median home value, we would still see an increase of 6.27%. That is an extra $50,000 you will pay next year for the same house today!

Rate Increases

Unless you're sitting on a pile of cash, most homeowners will be using a financial institution to help them buy a home. I.e., a mortgage. A mortgage consists of the principal amount borrowed and the interest you pay on it over the life of the loan, often 30 years. 30 years!

This is why with only a slight uptick in an interest rate your monthly payments can go up drastically as well as the total amount of interest paid on the loan over the 30 year period.

The current mortgage rate is 3.38% fo ra 30 year fixed mortgage. Those same three major housing industries are projecting increases over the next year as well.

Freddie Mac: 3.8%

Fannie Mae: 3.2%

Mortgage Bankers Association: 4.2%

That's an average of 3.7%. A 0.32% increase doesn't seem to be that much right? Well, let's take a look at the impact of that increase monthly, yearly, and over the life of the loan of 30 years. 

With a 20% down payment on an $800,000 home, you'll be financing $640,000 for the home.

3.38% Monthly payment: $2,831

3.7% Monthly payment: $2,945

That's a $114 per month increase, however, that only accounts for the percentage increase! Keep in mind we are paying $50,000 more for the same home next year. If you factor in the home value increase, here is a look at the difference.

3.38% at $800,000 home: $2,831

3.70% at $850,000 home: $3,129

Now your payments are up almost $300 per month! That's an increase of $3,576 per year and roughly $100,000 more for the life of the loan. 

That is why it is always important to look a both your personal motivations as well as your FINANCIAL motivations when buying a home.