If you’re a homeowner who’s decided your current house no longer fits your needs or a renter with the desire to buy a home, you may be planning on putting it off till there are better market conditions in place to purchase a home.
To determine if you should buy now or wait, you need to ask yourself a few important questions…
What will mortgage rates look like next year?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, it’s projected that as the economy continues to recover, rates will rise. Here are the forecasts for the fourth quarter of 2022 by three experts.
- Freddie Mac: 3.8%
- Fannie Mae: 3.2%
- Mortgage Bankers Association: 4.2%
The average of all three forecasts is nearly a full percentage point higher than today’s rates meaning any increase in mortgage rates will increase your cost.
What will home prices look like in the next year?
Three major housing industry entities project continued home price appreciation for 2022.
- Freddie Mac: 5.3%
- Fannie Mae: 5.1%
- Mortgage Bankers Association: 8.4%
Using the average of the three projections (6.27%), a home that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more.
What does it mean for you if both home values and mortgage rates rise?
If both home values and mortgage rates rise, you’ll pay more in mortgage payments each month. Let’s assume you purchase a $350,000 home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. Your monthly mortgage payment would be approximately $1,899.
Based on the industry forecasts mentioned above, that same home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7%. Your monthly mortgage payment, after putting down 10%, would increase to $2,166.
The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.
All in all, when considering when to buy, the financial benefits make it clear that doing so now is a better option than waiting until next year.