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Do you have a Denver house that no longer fits your needs? Perhaps you are currently renting, but have a strong desire to own your own home. Perhaps you are hoping the market conditions will be better next year so that you can purchase a home.
Two simple questions can help you decide whether you should buy now or wait another year:
- In a year, where will Denver home prices be?
- In a year, what will the mortgage rate be?
Now let’s take a look at the answers to both of these questions.
Where Will Denver Home Prices Be a Year from Now?
The housing industry is predicting continued appreciation of home prices in 2022 according to three major sources. Their forecasts are as follows:
- Fannie Mae: 7.4%
- Freddie Mac: 7%
- Mortgage Bankers Association: 5.1%
Today, the median home price in the United States is $353,900, according to the National Association of Realtors (NAR). A home that sold today for $353,900 would be worth $376,904 at the end of next year, based on an average of the three price projections above (6.5%). Waiting would therefore cost you an additional $23,004 as the prospective buyer.
Where Will Mortgage Rates Be a Year from Now?
Freddie Mac announced today that its 30-year fixed mortgage rate is 3.1%. According to most analysts, mortgage rates are likely to increase as the economy recovers. The three major entities noted above have forecast the fourth quarter of 2022 as follows:
- Fannie Mae: 3.4%
- Freddie Mac: 3.7%
- Mortgage Bankers Association: 4%
All three forecasts average out to 3.7%. As rates rise, your costs rise as well.
How Does An Increase in Home Values and Mortgage Rates Affect You?
If both of those variables increase, your mortgage payments will increase significantly. Suppose you purchase a $353,900 house today with a 3.1% 30-year fixed-rate loan (the current Freddie Mac rate) and make a 10% down payment. Using mortgagecalculator.net, your monthly mortgage payment would be about $1,360 (this does not take into account taxes, insurance, and other costs based on your location).
Using the industry forecasts mentioned above, this same home could cost $376,904 one year from now, with a 3.7% interest rate. Putting down 10% would result in a monthly mortgage payment of approximately $1,561.
There would be a difference of $201 in your monthly mortgage payment. That’s a $2,412 increase annually and a $72,360 total increase over the loan’s life.
By purchasing this year, you will have gained an additional $23,004 in home equity due to rising home prices, bringing the total net worth increase to over $95,364 (the $72,360 in mortgage savings plus the $23,004 in equity gain).
When considering whether to buy a Denver home, you may think about the benefits of homeownership that are not financial in nature. In answer to the question of when to buy, the financial benefits clearly point to now rather than waiting until next year.