Does it makes sense to wait until rates come down to buy a home? Maura Stevens with the FOCUS on NoVA Real Estate team takes a look at the costs of waiting to buy a home.

Interest rates have been a hot topic in the real estate market for the past several months. This has left some buyers with the mindset that they are just going to wait to purchase a home until the interest rates come down.  

However, there is a  COST TO WAITING to purchase.  An example of this was recently circulating on social media which explained that if you were going to buy a house in 1971 and decided to wait until the interest rates came down – you would have waited 21 years to buy a home.  In 1972, the median home price was $27,600 and by the time rates dropped in 1993 the median home price had risen to $126,500. In that time housing prices increased by almost 5 times what they were in 1972 and that potential buyer lost out on equity gains for 21 years.

While that is an extreme example, it illustrates really well the cost of waiting to buy. 

So what are the costs of waiting to buy?

1. The first comes from loss of appreciation gains. If a home’s value appreciates each year – that allows the homeowner to build equity in the home.  By waiting to buy you are losing out on those gains.
2. Another cost to waiting is loss of amortization on your mortgage. If you are paying 3,000 a month for rent or $36,000 per year – that money is considered a loss. However, if you are paying $36,000 to your mortgage you are paying down your principal and building equity in your home.
3. By waiting until interest rates come down you will likely end up paying more for the same home. Once the interest rate drops there will be more buyers in the market which means more competition and that will push housing prices up. So while buyers may have a lower interest rate they will be paying more money for the same home and may not see much, if any, savings in your monthly mortgage payment.
4. Finally, if interest rates do come down you can always refinance.  Many lenders are offering special programs where if you close now they will provide a low cost or no cost refinance if interest rates come down within a given time.

If you are waiting to buy because of job insecurity or a possibility of transferring out of the area – then those reasons for waiting overcome the cost of waiting because you don’t want to buy when your future finances may be at risk.