There are lots of people out there who debated purchasing a home last year who ultimately did not. There was a lot of talk about rising mortgage rates and home prices adding a sense of urgency to the decision but lets take a quick look to see if waiting was the right choice.
What Happened In 2014
Freddie Mac reports that the 30 year fixed rate was 4.53% on January 2, 2014. As of December 31, 2014 they show it at 3.87%.
The Home Price index has home prices appreciating 4.8% during the same period. So let’s do some quick math and see what the numbers turn out to be.
Assume a $500,000 home at the beginning of the year and with the 4.8% appreciation in price that makes it a $524,000 home at the end of the year.
Principal and Interest:
$500,000 @ 4.53% = $2542.35 $524,000 @ 3.87% = $2462.54
That’s a savings of $79.81 monthly or $957.72 a year by having waited, looking at just the monthly principal and interest payment. However, you can’t forget about that additional $24,000 the home costs, as well as the additional down payment which for 20% down would be $4,800. Staying in the home the U.S. average of 5 years, the savings is $4788.60. Wow, that’s just about a wash. A lucky wash in our opinion…
The Bottom Line
We don’t expect to see this kind of scenario in 2015. Home prices are expected to rise an average of another 4%. Interest rates are expected to rise by a full percentage point to near 5%. Therefore, we recommend people in a position to be able to buy a home before these predictions become reality contact us to start the process. We have the knowledge and expertise to go over the numbers with you and see if making a move makes sense for you. No hassle, no obligation – we’re here to help!