Are You a Buyer? Then Consider Cost, Not Just Price

December 2015

 

 

Sellers in our current market are concerned about where home values are going in the next 6 months.  But as a buyer, your focus should be on the long term cost of the house.  All projections point to interest rates increasing about 3/4 of a percentage point by this time next year and home prices are projected to increase by 5.2% in that same time span.  For example, if you purchased a home today for $250,000 at 3.95% interest, your mortgage payment would be $1,186.34.  If you waited to buy that same house next December, based on the projections, it would cost $263,000 at an interest rate of 4.6% and your mortgage payment would be $1,348.25…$161.91 more a month for the same house.  So over a 30 year mortgage you would be paying $58,288 more for just waiting one year.  So if you are thinking about buying and haven’t decided, here are some good reasons to go for it now.  Housing is the one leveraged investment available.  You are paying for housing whether you own or rent and in today’s market rent may be higher than a mortgage payment.   Making a house payment is forced savings for people who have trouble putting away savings.  There are substantial tax benefits to owning.  Owning a home is hedging against inflation as housing cost and rents tend to increase faster than the rate of inflation.  Happy house hunting!