To demonstrate why now might be the best time to purchase a home in 2019, we’ve been tracking three trends in the market: the average interest rates (as pulled from Fannie Mae), the median price for detached homes, and PITI payments (principal, interest, taxes, and insurance). Here’s what we’ve found:
As of December 2018, the average interest rate was 4.75%. That figure has dipped down this January to 4.51%. Expert pundits have predicted that by December of 2019, interest rates will be between 5% and 5.25%.
In December of 2018, the median home price for detached homes was $725,000, and that remained stagnant as we transitioned into January. However, economists from the California Association of Realtors predict a 3% price increase very soon. Keep in mind, though, that that increase shows the market slowing way down; it has increased a lot more than 3% over the last several years. But if that prediction is accurate, it means that by December of 2019, the median price will increase to somewhere around $746,750.
Based on that information, here’s what your monthly payments might look like:
- As of December 2018: Based on the 4.75% prevailing interest rate and assuming a 20% down payment on a $725,000 home, your payment would have been $3,840.
- As of January 2019: With the lower rate of 4.51%, your monthly PITI payment would be $3,756.
- As of December 2019: Assuming the aforementioned predictions are true, if you wait until the end of this year to buy a home, your monthly payment would go up to $3,948 with a 5% interest rate—a difference of $200 a month when you compare it to buying a home now.
- With a 5.25% interest rate, your monthly payment would be around $4,037—$250 more than if you had bought a home this January.
Everyone’s situation is different: If you’re buying a less/more expensive home, these numbers will be a little different for you. In general, however, the data I’ve shown you today indicates that it is a good idea to buy a home now as opposed to waiting. Some think that it’s wise to wait to see if the prices go down before they buy a home but, even when home prices go down, the increase in interest rates can dramatically affect home affordability.
If you’re thinking of buying a home and would like to see how these trends will impact your specific situation, don’t hesitate to reach out to me. I’d be happy to help you further.