From the Washington Post:
Millennials, what are you waiting for? You should be buying a home right now. That’s the conclusion of a pair of recent studies that looked at homeownership.
Zillow, the online real estate Web site, considered how rising interest rates and home price appreciation would affect a buyers’ ability to purchase a home. Even though interest rates have been hovering at yearly lows, most observers expect them to begin rising soon. Home values have been steadily climbing for some time.
Assuming that home values stayed constant and that a home buyer would put 20 percent down and take out a 30-year fixed-rate mortgage, Zillow found that a D.C. area buyer who waits one year to purchase a home would probably pay an additional $186 per month.
According to Erin Lantz, vice president of mortgages at Zillow, the rule of thumb is that a one percentage point increase in mortgage rates decreases affordability by 10 percent.
When shopping for a big purchase, the line that “it never hurts to wait” often makes sense. But that’s only because by looking around more, you might find a better deal. Which is why, with interest rates expected to rise over the next few years and home-buying demand still heathy, following that advice could be costly in today’s real estate market.
To put a price tag on the possible cost of waiting to buy a home, real estate information website Zillow Inc. assumed that the rate on a 30-year fixed-rate mortgage would rise 1 percentage point. It calculated how that higher rate — which would be about 5.1 percent — would affect a buyer’s monthly mortgage payments. Zillow applied that rate to the median home price in 35 metropolitan areas, assuming a 20 percent down payment and a 30-year fixed-rate mortgage. (More assumptions that went into the calculations are here.)
The one-year waiting costs ranged from a minor $65 a month in St. Louis to a major $710 a month in San Jose, California.