The housing market across the nation is experiencing unprecedented conditions. As I’ve discussed in previous posts, we’re continuing to see an ongoing shortage of inventory. With home prices on the rise and mortgage rates climbing, many homeowners are considering holding onto their home even though they’d prefer to upgrade. Although the competitive market and rate hikes are understandably discouraging, you should be aware of the cost of waiting to sell. If you’d like additional insight before you decide to postpone listing or forge ahead, I break down the cost of waiting below:
How Moving Forward Can Save Thousands
My colleague at mhm lending, Amy McBrair, has compiled data to demonstrate how waiting even six months in this market comes at a cost. Here’s an overview of the financial impact you can expect at six months, one year, two year, and three years based upon a property in Boulder that’s currently valued at $1,500,000. These projections are based upon data sourced by MBA and MBS Highway.
- Today: If you purchase that $1.5 million property today with a conventional 30-year fixed-rate mortgage loan, you’ll need a down payment of $300,000. Based upon today’s rates, you may be able to secure a 4.75% interest rate.
- Six months from now: By waiting just six months, the pricing and interest rate trends project this same property to be listed at $1,565,521. This is a price increase of 4.37% in just a few months, so your down payment will increase to $313,104. When combined with the estimated interest rate of 5%, this will make your monthly payment considerably larger.
- One year from now: The home that costs $1.5 million today is expected to jump to $1,629,589 in one year. This is an increase of 8.64% and requires a down payment of $325,918. At this point in the future, the interest rate is projected to be 5.125%.
- Two years from now: Two years down the road, the home that’s $1.5 million today will likely reach $1,714,568 (an increase of 14.3% from the price today). The down payment for this price point will need to be $342,914. Two years from now, interest rates may reach 5.375%.
- Three years from now: For those who wait three years to buy, the same property that’s $1.5 million now is expected to hit $1,798,295. This is an increase of 19.89%, requiring a much more substantial down payment of $359,659. If mortgage rates continue on an upward trajectory like we’re predicting, the rate will likely be in the neighborhood of 5.875%.
The Bottom Line
With homes in Boulder appreciating at a stunning rate, the fact of the matter is that you’ll get more home by selling now and using the proceeds to upgrade rather than waiting. In addition to benefiting from a lower price point (and more appreciation on your new investment), your cash flow will be positively impacted by locking in today’s lower interest rate. Here’s another breakdown of the how much more you may spend by staying in your current home:
- Waiting six months: Your cash flow will be reduced by approximately $463 per month, adding up to $5,562 per year. The loss in property appreciation is approximately $65,521, and amortization lost is $9,149. All said, the cost of delaying your purchase just six months adds up to a total cost of $74,670.
- Waiting one year: By waiting one year, your larger monthly payment will cost you $839 a month, coming in at $10,063 annually. The loss of property appreciation adds up to $129,589, with amortization lost equaling $18,517. Waiting one year means the cost of waiting is $148,106.
- Waiting two years: If you choose to wait two years, loss in cash flow will be an estimated $1,421 per month, adding up to $17,053 per year. The loss in property appreciation will be approximately $214,568, and amortization loss will be $37,933. Thus, postponing your purchase by two years will add up to $252,501 in loss.
- Waiting three years: Thinking about waiting for three years? Your monthly payment will increase by about $2,250, adding up to an annual loss in cash flow of $27,004. The loss in appreciation is estimated to be $298,295, with amortization lost coming in at $58,291. The total cost of waiting three years in this market means that it’ll cost you a total of $356,586.
If you’re thinking about selling your property, moving ahead with the process now will help you save on your next home. The market we’re in is incredible, and rising home prices means that today’s sellers are in the best position for maximizing their return on investment and benefiting from future appreciation of their next home. Interested in listing your home in Boulder? I’d love to help. Please contact my team to get the ball rolling.