Why Waiting To Buy or Sell

Can Cost More Than You Think!

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For those buyers that have been holding back, waiting for the market to drop or interest rates to level off before making a decision - your ‘waiting game’ has cost you money. For sellers trying to time the "peak of the market" you will not see that any time soon - according to experts the market is NOT going to peak this year.  Everything has a "cost," and in Economics 101 cost of waiting would be defined as an “Opportunity Cost” or 'the missed benefit that would have been derived from an option not chosen,' buying or selling versus waiting. 

Whether renting, and desire to become a homeowner; a homeowner considering the sale of your current house because it no longer fits your needs or you simply want to move up or scale back - you might be thinking that waiting six months to a year could mean a better interest rates or a drop in prices.

As you'll see, this could be one of the very best times to sell or buy with prices still rising and interest rates above historic lows but well below what we were seeing 5 and 10 years ago. Experts advise that home price will continue to rise as inventory remains constricted.

There are two basic questions you should be asking regardless of whether you are buying or selling:

• What is likely to happen to home prices in 2022? Although the outrageous prices we’ve experienced this last year have begun leveling off slightly prices will continue to go up based on the number of people relocating to our area. 
• Where will mortgage rates be by the end of 2022? A very important question unless you're buying with cash!

Let’s get some answers to both questions from the experts and see what waiting six months to a year could cost you.

The consensus is that mortgage rates will continue to rise steadily increase over the next three years. According to a report released by the New York Federal Reserve rates are expected to reach 6.7% by 2023 and 8.2% by 2025.

Now, let's check the local Dallas-Fort Worth Metroplex (DFW) outlook. According to the Texas Real Estate Research Center at Texas A&M, the forecast is for home prices to slack off a bit from this past years double-digit growth but still be in the 9% to 10% annual appreciation range. This will be due to the continued hot job market in our area bringing an influx of new residents coupled with a continued tight housing supply.

As home prices in the DFW metroplex continue to rise well above the national average let’s look at a home valued today at $450,000 with a 9% annual appreciation. At the end of the year, in just 6 months, this home would be valued at $470,250 or an increase of $20,250 above the purchase price.

This begs the question can you really afford to wait and lose over $20,000 in potential equity or worse find yourself priced out of the home you want?

The other basic question to be answered is mortgage rates - what will happen to them in a growing inflationary market?   

Where are mortgage rates expected to be by the end of 2022?

The interest rate on a conventional, 30-year fixed rate mortgage has risen continually since January as the Federal Reserve has raised interest rates in an effort to quell inflation. According to Bankrate® the current rate for a 30-year fixed rate mortgage in the DFW metroplex is 5.61% depending on credit score and other lender qualification factors such as Debt To Income (DTI) and the Loan-To-Value (LTV). 

Increases in the mortgage interest rate increase your total and monthly cost of home ownership. Your monthly payment, Private Mortgage Insurance or PMI (typically 1% to 5% of the loan, if required), all increase as well as how much you will have paid at the end of the loan.

What do rising home prices and mortgage interest rates mean?

Very simply, it means that you will pay more for the home you want, if you can still afford it, because in some cases you may not be able to meet the lender qualifications.

Let’s assume you purchase our example $450,000 home now with a current 5.71%, 30-year fixed-rate loan. After making a 20% down payment your monthly mortgage payment (principle and interest only) will be $2,092.

It should be obvious that waiting until the end of 2022, the same or comparable home in the DFW metroplex is projected to cost $470,250 and a 30-year fixed-rate conventional mortgage could be hovering at or above 6% based on the industry forecasts above. This brings the new monthly mortgage payment (principle and interest only) to $2,256 - a difference in the monthly mortgage payment of about $164. Yet, there are more escalations to be considered such as home insurance that is also based on the valuation of the home, so $164 increase is just a start, assuming you still qualify!

One of the basic mortgage qualification criteria is a Mortgage-To-Income ratio of 28%. This means the mortgage payment cannot be greater than 28% of your gross income. Although this varies among lenders, this is a relatively safe benchmark. To still qualify for a comparable home at $470,250 you would need to show the lender approximately $7,028 in additional annual gross household income at the end of 2022 versus buying it now in mid-2022!  

Bottom Line

When considering the purchase of a home, you are likely motivated by some of the non-financial benefits, such as security, stability, privacy and control over your living space.

However, it is the financial benefits that can make it clear that doing so today is much more advantageous than waiting for six months to a year. Remember the old adage, "nothing gets cheaper with time."

Give me a call at 469-556-1185 if you’re interested in buying a home because we have access to many homes, some even pre-market, through our network of Realtors built over nearly 4 decades in this area.

If you are selling, we have more than a hundred of Five Star Reviews. a consistent track record of above market price sales with multiple offers for our listing clients, not to mention very short Days On Market.

One question we're frequently asked is 'with such a "hot" market how can I sell when I can't make an offer on a home until mine is sold. Either way I am taking a big risk!'

I have several solutions for you to consider that can allow you to move out of your current home and into your new home with relative ease. Just check the appropriate box below and we can get with you and answer your questions.  

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