So we all know that interest rates have been rising over the course of the year. Yesterday’s post showed a graph from Freddie Mac with interest rates for all of 2013. Rates rose over a full percentage point over the year.
Now that the rates are higher, let’s see what waiting a year might have cost a potential buyer. Check out this chart from Keeping Current Matters:
You can see that in November of 2012, according to the National Association of Realtors, the average price of a home was $227,900. Interest rates from Freddie Mac were at 3.32%. Given those numbers, the monthly payment of principal and interest for a homeowner was $1,000.61.
Fast forward one year, and in November of 2013, the average price of a home went up to $244,500. So did the interest rate with a percentage of 4.29. The monthly payment with these numbers was $1208.53. So simply by waiting a year to buy, the potential homeowner now had to pay $207.92 more a month than if they had bought back in November of 2012. That’s a good bit of money a month!
So where will these numbers be a year from now? How much more will it cost to purchase a home? With interest rates on the rise, people will either have to spend more or get a bit less house than they were planning on. Financial experts predict that interest rates will rise to the 5’s and maybe even hit 6%. That could have a huge impact on homebuyers. Not to mention the impact this rise in numbers will have on buyers trying to qualify for loans. Some may find that a house they could qualify for a year ago may now be out of their reach.
Take home from this is that if you are on the fence about purchasing a home, look at the numbers and your finances. Will waiting a year be worth it?