If you’re thinking of buying a home, but don’t feel quite ready, think again! What is the Real cost of waiting to buy? Not everyone is buying real estate or should buy. But for many of you that know you want to buy at some point and are wondering if you should jump in now or if you should wait, this is for you!

I’ve been hearing buyers say something like “I know I want to buy, I’m ready to buy now but should I wait 6 months, or 1 year or do it now?” or they ask me “Prices have gone up so much is it too late to get in before the market falls?”

Well let’s talk first about the opportunity cost of waiting.

Market Trends

You may think waiting a few months won’t make a big difference financially, but the real estate market has shown it can- and it will! Simply said, if home values are higher or if mortgage rates are higher, either of these will effectively result in a higher mortgage payment for the same loan amount. While there is no crystal ball, it’s safe to say that property values are on the rise and interest rates cannot remain this low forever.

The opportunity cost of waiting to buy is essentially the additional funds that will be required to buy a home if prices or interest rates increase, and the equity that could have been realized if values increase. When property values increase so does the down payment requirement, and your monthly mortgage payment will increase and it will include more interest. Additionally, you can lose potential gains specifically any gains in equity you could have achieved in the value of the property going up. You could have missed equity and you don’t want that right?

Rent vs Mortgage

Let’s put this into perspective quickly- if you’re paying $4000 month in rent that money is considered a loss. If you’re paying $4000 a month towards mortgage, part of that money is going towards the principal of the loan and thus you’re building that important home equity and then when you’re spending $4000 a month on a mortgage, if the home goes up in value you have gained equity or money just like if you were holding a stock that went up in value.

Bottom line: you may think you’re saving money by delaying the purchase of your next home but you could be losing more money on the missed equity, the higher down payment requirements, paying a higher interest rate and on the higher mortgage payments for the same loan amount.

If you are looking at the option of selling a home in the San Francisco or Peninsula in the near future, please reach out to us.