The Cost of Waiting to Buy: 2021 v. 2022

If you currently rent and have been on the fence about becoming a homeowner, or a homeowner that might be thinking it is time to upgrade or downsize your home, you may be thinking “the new year might bring better market conditions to purchase a home”.

To determine if the time to buy is now or if you should wait until 2022, ask yourself two simple questions:

What will home prices be like in 2022?
Where will mortgage rates be by the end of 2022?

Don’t worry, we are here to help you answer both of those questions!

First off, what will home prices be like in 2022?  Well, three major housing industry entities project continued home price appreciation for 2022, according to Keeping Current Matters. Those forecasts look like this:

Freddie Mac: 5.3%

Fannie Mae: 5.1%

Mortgage Bankers Association: 8.4%

When you take the average of the three projections (6.27%), a home that sells for $265,000 today would be valued at $281,615 by the end of next year. That means, if you wait to purchase, it could potentially cost you more. You could end up paying an additional $16,615 as a prospective buyer if you wait. 

On to the second question, where will mortgage rates be by the end of 2022? As of today, the 30-year fixed mortgage rate is hovering near historic lows. 

However, most experts believe rates will rise as the economy continues to recover from hits during the COVID-19 pandemic. Below are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:

Freddie Mac: 3.8%

Fannie Mae: 3.2%

Mortgage Bankers Association: 4.2%

That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates (Keeping Current Matters).  Due to this forecast, those increases in mortgage rates will increase your cost.

You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $265,000 home this year (the median home price in Springfield currently) with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,399.

That same home could cost $281,615 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $1,597.

The difference in your monthly mortgage payment would be $198. That’s $2,376 more per year and $71,280 over the life of the loan.

Have more questions about the market or your next steps in the home buying/selling process?  Call today (417-812-5055)  so we can help you better understand the market and how you could potentially start building your home equity and wealth! 

You can always find your current home value HERE.

Information found at Keeping Current Matters