Last year, many prospective homebuyers couldn’t compete in Austin’s fast-paced real estate market, so they held off. Many of those homeowners who waited are coming back this year determined to buy a home in 2022. But if you’re one of the few homeowners who is still waiting on purchasing a home, it will cost you more money in the future, and here are the two main reasons why:
Why Waiting to Buy Will Cost You More. Reason #1: Home Prices
Where will home prices be a year from now? If you’re waiting to buy a home in Austin’s real estate market, this is one question to ask. We all know last year’s home prices were historically high due to low inventory levels. This year is shaping out to be a little different. In the Austin Board of REALTORS® January numbers, Cord Shiflet, the ABOR President, said new developments are coming into the Austin area to relieve the low inventory numbers. Still, there needs to be more homes and quickly. In the same piece, the President of the Home Builders Association of Greater Austin said, “Austin’s unprecedented economic growth shows no signs of stopping,” and demand is higher than ever. But, supply chain issues are making it harder for builders to complete homes. This means we’re slowly increasing our inventory in Austin, but not quick enough. It will leave us in almost the same predicament as last year. Frannie Mae and Freddie Mac predict home prices to appreciate by 7% this year.
According to the National Association of REALTORS®, the latest median price of a home is $353,900. If a home sold for $353,900 today, it would be worth $378,673 by the end of this year if the 7% appreciation is true. That’s an additional $24,773 for homebuyers to pay!
Why Waiting to Buy Will Cost You More. Reason #2: Mortgage Rates
Where will mortgage rates be a year from now? This is the second question prospective homebuyers have to ask as well when buying a home. Mortgage rates have reached historical new lows during the pandemic and throughout 2021, but that’s changing. Since December 2021, mortgage rates have been steadily increasing. And many experts agree that rates will continue to rise this year. Predictions for mortgage rates for the fourth quarter of 2022 are 3.4% by Fannie Mae and 3.7% by Freddie Mac. Today’s current mortgage rate hovers around 3.1%.
An increase in both of these factors will mean homebuyers will pay more money. More money is being spent on purchasing the home, but also more money monthly in their mortgage payments. Let’s look at an example to see the difference.
A mortgage payment on a home purchased for $353,900 with a 10% down payment and is paid back over 30 years, and an interest rate of 3.1% is about $1,360. That same home could cost $378,673 with a mortgage rate of 3.7%, and with a 30-year mortgage and 10% down payment, the monthly mortgage payment would be $1,568. That’s over a $200 difference a month and almost $2,500 a year!