If you are one of those buyers who are waiting for the house prices to come down more, this post is dedicated to you. The purpose of this post is not to rush you to go out and buy a house as soon as possible, but rather to point out other aspects of a house purchase transaction that you may not be aware of.
The average Washington state mortgage interest rate in September 2017 for a 30-year-fixed was around 3.5% and 15-year-fixed was around 2.8%. In September 2018 those rates are, respectively, approximately 4.5% and 3.9%. Interest rates have been increasing everywhere. With the same credit score and same down payment, a homebuyer’s interest rate have gone up by approximately 1% by waiting for one year. What does that translate into dollar amount?
Let’s say you’ve been looking at $800,000 houses with 30- year-fixed term and 15% down payment in 9/2017. With interest rates increasing by 1%, you have not changed anything on your end, but you know can only be qualified for $720,000 in 9/2018. Your purchase power has decreased significantly, especially in this competitive market. Another way to look at it, to buy the same $800,000 house last year, now with 1% increase in interest, you will pay for the loan of $880,000.
On the other hand, home appreciation in Seattle has been recorded at 12 to 15% year. It is something that you could be missing out on by waiting for price to come down. In our example, that number is about $80,000 to $96,000. People believe that market is “cooling down” and house prices will come down with it. Please read my previous blog to see my point of view about that assumption. Houses are not sold as quickly as they used to be mainly because there is more availability, not because real estate in Seattle becomes less desirable for some proven economic reason. Real estate in Seattle is in a strong and healthy stage where buyers and sellers both have fair chance for getting what they look for in the transaction without one takes more risk than the other. Interest rates are expected to continue to rise approximately 5% by the end of this year and mid 5% around this time next year.
Ultimately, buying a house is a long-term investment. Trying to time is the same as timing stock market but also involves your lifestyle, your living environment and your loved ones. The right time is when you and your family financially and emotionally ready. Again, this blog is only intended to provide you with helpful information. It is not in any way a guideline or reference to your home purchase timing. Make sure to keep in mind that the listed house price is not the only important fact in your home purchase.