Lorraine Ryall
Phoenix is set to be the top housing market of 2017, placing it ahead of various markets, such as Los Angeles, Boston and Sacramento.
The city is predicted to have more than 7 percent sales growth, and home prices are predicted to increase 6 to 9 percent this year. Along with the rising home prices, mortgage rates are expected to continue to rise. So, not only will you be paying more to purchase the home, but your mortgage payment will be higher too.
BUYERS
With home values and mortgage rates continuing to increase, now is the time to buy. The longer you wait, the more it will cost. You will be paying more for the same home and a higher mortgage payment. However, if your debt to income doesn’t allow for a higher purchase price when the interest rates go up, your buying power goes down. If the maximum you qualify for is $350,000 at 4 percent and you wait to purchase, when the mortgage rate increases to 5 percent, your buying power decreases. Instead of purchasing a home at $350,000, you only can purchase a home for $308,000, and you will be paying the same monthly mortgage payment. While home values would have gone up, your buying power would have gone down. The chart on the left shows the cost of waiting a year.
| BUYING | |||
| Buying Today | Buying in a Year | ||
| Purchase | Purchase | 9% increase in home prices | |
| $350,000 | Purchase price | $381,500 | Purchase price |
| $315,000 | 10% Down payment 4% interest | $343,350 | 10% Down payment 5.5% interest |
| $1,504 | Monthly mortgage payment | $1,950 | Monthly mortgage payment |
| By waiting a year, you will pay an additional $31,500 for the same home and your mortgage payment will increase by $446 a month. | |||
SELLERS
One of the questions I am often asked by sellers is whether they should sell now or wait and let their home value continue to increase. If you are buying in the same market, it doesn’t pay to wait. If you are moving up, while your home price is going to increase, so is the home you are going to purchase, but with a higher base price, it will increase more. If you are downsizing, while you may sell for more, the higher mortgage rate may negate any gain.
Interest Rates Can Have Biggest Impact
After seeing record low interest rates over the past few years, rates have now started to increase and they are expected to continue to go up. This can have the biggest impact on whether to sell and buy now or wait a year. These charts on the right estimate a home price increase of 9 percent, current interest rate of 4 percent, with an increase to 5.5 percent in a year. As you can see, the sales price is slightly impacted, but the biggest difference is your monthly mortgage payment. With interest rates on the rise, now is the best time to make your move.
The longer you wait, whether you are a buyer, seller or both, the more expensive buying a home will be. You will be paying more to purchase the home plus a higher monthly mortgage payment. If you don’t qualify for a higher loan, your purchasing power will be reduced. Therefore, while homes are going up in price, the price you can afford to purchase is going down.
If you are thinking of buying or selling and would like more information or a market analysis, please email Lorraine@Homes2SellAZ.com, or call (602) 571-6799. Visit her website at Homes2SellAZ.com. Lorraine Ryall has been a Multi-Million Dollar producer for the past nine years.
| MOVING UP | |||
| Selling and Buying Today | Selling and Buying in a Year | ||
| Sale | Sale | 9% increase in home prices | |
| $350,000 | Sale price of current home | $381,500 | Sale price of current home |
| $500,000 | Purchase price of new home | $545,000 | Purchase price of new home |
| $150,000 | More to purchase new home | $163,500 | More to purchase new home |
| Purchase | Purchase | ||
| $500,000 | Purchase price of new home | $545,000 | Purchase price of new home |
| $400,000 | New loan, 20% down, 4% interest rate | $436,000 | New Loan, 20% down 5.5% interest rate |
| $1,907 | New monthly mortgage payment | $2,476 | New monthly mortgage payment |
| By waiting a year, you will pay an additional $13,500 to purchase the new home and your mortgage payment will increase by $569 a month. | |||
| DOWNSIZING | |||
| Selling and Buying Today | Selling and Buying in a Year | ||
| Sale | Sale | 9% increase in home prices | |
| $350,000 | Sale price of current home | $381,500 | Sale price of current home |
| $200,000 | Purchase price of new home | $218,000 | Purchase price of new home |
| -$150,000 | Less to purchase new home | -$163,500 | Less to purchase new home |
| Purchase | Purchase | ||
| $200,000 | Purchase price of new home | $218,000 | Purchase price of new home |
| $100,000 | $100,000 down payment 4% interest rate | $104,500 | $113,500 down payment 5.5% interest rate |
| $477 | New monthly mortgage pymt | $593 | New monthly mortgage pymt |
| By waiting a year, you will gain $13,500 in the sale and purchase of both homes. However, your mortgage payment will increase by $116 a month. | |||