I had a 45 minute phone call with an awesome (potential homebuyer) this morning.  We have talked every 3 to 6 months over the last 2 years, and the main topic of discussion has been whether the time is right to buy,

I’m sure you are having some version of this conversation regularly.  And as much as I love the “marry the house, date the rate” maxim, I wanted to run some real numbers.  Plus I love spreadsheets.

So, I went back 2 years from today and did the math at the $300k price point she is considering.  In the area she is looking at, appreciation has been 12% over the last 2 years.  During that time rates have DROPPED from a national average of 7.12% to 6.79%.  If she had bought 2 years ago, even with HIGHER rates, she would have saved $36k in equity and be paying $150/mo less. 

Looking forward 2 years, the average projections are around 9.7% 2 year appreciation and rate improvement of approximately 0.29%.  So if she waits another 2 years, the $300k house she is looking at today will cost $30k more, and the payment will be $117/mo higher.  So looking forward or backwards, it appears waiting is costing money.

But what if the rates drop further?  That will bring more buyers and higher home prices.  Plus, if you already own, you can refinance to take advantage of market rates.

What if home prices drop further?  The experts think that is unlikely.  It’s hard for me to imagine significant price drops in a market starved for inventory, a slow down in new home builds, and the majority of current home owners with low rates we are unlikely to ever see again (and therefore reluctant to sell).

My career has been littered with stories of great people that hurt themselves by trying to time the market, and very few stories of anyone successfully predicting the future.  I welcome your feedback, but from what I expect for the future and have seen from the past, the cost of waiting is high.  If you know anyone that wants to walk through the math in more detail, let’s setup a call or meeting.

P.S. I am seeing an increase in sellers willing to provide significant seller paid closing costs.  This can be leveraged to get tomorrow’s lower rates without being subject to future market appreciation.