It’s a one-two punch! Rates go up therefore buying power goes down. Or rates decline and more buyers enter the market and home prices rise due to demand.
So if rates go down as you want, the number of new buyers entering the market will drive prices up. The gain you want in a lower rate and therefore a lower payment is diminished because the house now costs more due to the competition.
I had a psych professor in college say “No action is an action.” If there is a car wreck in front of our home and you don’t go out to help, your “no action” is an action.
So to say you are not going to buy a home now, you are going to do nothing is, in-fact, an action.
Let’s unpack the buy now or wait scenario.
Over the last five years, the average annual appreciation level has been 7.55% in Jackson County. Over the last 60 years, it has seen 4.75% annual appreciation. That’s a respectable track record.
Let’s use 4.5% annual appreciation. And a sales price of $450,000 and a 95% Loan to Value for a loan of $427,500. After one year the 450,000 home would be worth $472,172.
Let’s assume that the rate today is 6.99 (with an APR of 7.274%) and let’s guess that in 6 months the rate will be .5% lower and in one year the rate will be 5.99% (with an APR of 6.250%).
In one year, assuming you buy now, the gain would be $26,523 between the appreciation and the paying down of the principal. Even if you account for the refinancing costs, say $4,000, you would still be ahead by $20,885 to buy now instead of waiting a year for a 5.99% rate.
One of many reasons I like the company I work for is that when our clients come back to refinance, we waive the lender fees. This is a nice savings off the refinance cost.
Here’s the other thing. People are their own worst enemies. I have heard all these recently.
“I only have a 600 credit score.” “I had bankruptcy two years ago.” “I have the down but not the closing costs, I can’t buy.” “I don’t have money for a down (there are several programs available).”
Find a way to buy now. Buy a house, it may not be your Dream Castle or McMansion but just get a foot in the equity door, your front door!
Let’s run the numbers and do some brainstorming. I won’t do a hard pull on your credit. There is no cost or obligation. Give me a ring at 541-708-4020.
DAVE PORTER has been in lending for four decades. He is a Sales Manager for loanDepot in Southern Oregon. He can be reached at 541-708-4020 or at dporter@loanDepot.com. He is licensed to originate home loans in OR and WA.
