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Jan 13

Did It Make Sense to Wait?

Time vs MoneyOver the course of last year, many people debated purchasing a home, but ultimately did not. Let’s look at whether the decision to wait to buy made sense financially.

What happened in 2014?

The 30 year fixed rate on January 2, 2014 was 4.53% as reported by Freddie Mac. Looking at the chart below, the monthly mortgage payment with principal and interest for a $250,000 home would have been $1,271.

Even though interest rates have dropped below 4% and ended 2014 at 3.87%, national home prices appreciated by 4.8% in 2014 according to the Home Price Expectation Survey. The price raise in King County matches that increase. That same home appreciated by $12,000 and now costs $262,000. The most recent report by Freddie Mac puts the average 30-year fixed rate at 3.73%, still lower than last year.

Many may say, “See! Waiting a year made total sense, I’m saving $61 a month.” And that’s right―with this example, over the course of the year the cautious saved $732 with the currently lower interest rates.

The caveat?

The hidden catch? The 2015 purchase price went up by $12,000 which makes your 5% down payment increase $600. Consequently, your savings would only be $132/year or $11/month.

 Waiting to Purchase Home until 2015
 Dollar Difference from 2014 Purchase
Jan 2014 Purchase Price $250,000
5% down $12,500
Monthly Payment (P&I) at 3.73% $1,271
Jan 2015 King County Purchase Price + 4.8% $262,000 $12,000
5% down $13,100 $600
Monthly Payment (P&I) at 3.73% $1,210 ($61)
Jan 2015 Eastside Purchase Price +16.25% $290,625 $40,625
5% down $14,531 $2,031
Monthly Payment (P&I) at 3.73% $1,343 $72

Living on the Eastside

If you are considering living on the Eastside, i.e., east of Lake Washington, the average 2015 median price went up 16.25%. That same house now costs $290,643,or $40,625 more. Your 5% down becomes $14,531, and your mortgage payment rises to $1343/month.

SO, living on the Eastside you saved nothing by waiting… you lost money. If you live in King County, you saved $11/month.

Then it comes down to the question of whether saving $11 a month is really worth holding off owning your home after you weigh in all the benefits that come along with that ownership… Like building your equity instead of your landlord’s equity, having control over your space, your added tax benefits, to name a few.

Bottom Line

The experts are predicting that by the end of 2015 homes will appreciate another 4% and interest rates will increase by a full percentage point. If you are in a position to be able to buy a home now, before these predictions become a reality, contact me and let’s get started!

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