Rising interest rates, inflation and home prices are understandably giving some buyers pause in regards to purchasing a new home. Unfortunately in a market as competitive as Austin, rising interest rates do not necessarily signal that home prices will decrease. This feel like a very difficult situation to be in if you are in the market for a new home. So what is the best thing to do? Buy now or wait until things settle. Read on for more on the cost of buying now versus waiting.
Some buyers may feel it is best to wait until home prices and interest rates fall. The reality is in a market like Austin's, the housing prices are not predicted to go down anytime soon. And while that may seem daunting, it is important to remember the home values and appreciation in Austin. According to an article from www.RealtyAustin.com, "What is predicted? Inventory is still limited, so there is still buyer demand. This demand will continue to increase home prices. Mortgage interest rates are also predicted to rise. If you are hedging your bet on waiting six months to a year, the cost of waiting could be even greater."
Take a look at the cost difference on estimated monthly payments in the following scenarios. Note: the scenarios are based on industry predictions.
Interest Rates Increase and Housing Prices Remain the Same
Today 6 Months 1 Year
Home Price $500,000 $500,000 $500,000
Down Payment 5% 5% 5%
Mortgage Interest Rate 5.35% 5.70% 6%
Mortgage Length (Years), Fixed 30 Years 30 Years 30 Years
Mortgage Amount After Downpayment $475,000 $475,000 $475,000
Monthly Payment $2,652 $2,757 $2,848
Yearly Payment $31,830 $33,083 $34,174
The interest rate example above is based on a 30-year fixed mortgage loan for $500,000 with 5% down and a credit score of 700-719.
Home Prices Increase and Interest Rates Remain the Same
Today 6 Months 1 Year
Home Price $500,000 $530,000 $561,800
Down Payment 5% 5% 5%
Mortgage Interest Rate 5.35% 5.35% 5.35%
Mortgage Length (Years), Fixed 30 Years 30 Years 30 Years
Mortgage Amount After Downpayment $475,000 $505,500 $533,710
Monthly Payment $2,652 $2,812 $2,980
Yearly Payment $31,830 $33,739 $35,764
The interest rate example above is based on a 30-year fixed mortgage loan for $500,000 with 5% down and a credit score of 700-719.
What is Predicted VS the Cost of Waiting
Today 6 Months 1 Year
Home Price $500,000 $530,000 $561,800
Down Payment 5% 5% 5%
Mortgage Interest Rate 5.35% 5.7% 6%
Mortgage Length (Years), Fixed 30 Years 30 Years 30 Years
Mortgage Amount After Downpayment $475,000 $503,500 $533,710
Monthly Payment $2,652 $2,922 $3,200
Yearly Payment $31,830 $35,068 $38,398
The interest rate example above is based on a 30-year fixed mortgage loan for $500,000 with 5% down and a credit score of 700-719.
The only way to avoid paying more is for home prices AND mortgage rates to both godown and there is just no way to predict when, or if, this will ever happen. Bankrate.com, Forbes, and others predict that interest rates will continue to rise for at least the remainder of 2022.
As far as housing prices in Austin go, many may be concerned that they will begin to drop. The good news is that looks to be highly unlikely,
"According to data reported by the Federal Housing Finance Agency, of all the major cities in the US, Austin is the only city that shows only one year of negative appreciation over the past 20 years. If you are a seller watching your home’s value grow, now is the perfect time to receive an estimate of your home's worth.
Austin is also the number one housing market for growth and stability, according to CultureMap. This further illustrates that buyers should have a sense of confidence in the market, as job creation and economic growth continue to trend upward."
While the housing market, interest rates, and inflation may be impacting everyone, every buyer's situation is unique. If you have additional questions about the market and your specific situation, please reach out to your favorite REALTOR®. I would happy to help!
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