Staying put can be risky

Dated: November 29 2020

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Potential home buyers are often reluctant to buy in the short term because they think buying at the wrong time is risky. I guess it’s human nature to feel comfortable keeping things as they are, but I would like them to understand that waiting carries risk too. 

Let’s say a couple wants to buy a $500K home, and they have $50K available for a down payment. They’d like to save another $50K so they can have a 20% down payment, so they plan to save $2,083 a month for two years.

Suppose that home prices in our area should increase by 2% over the next year. That would mean that today’s $500K home will cost $510K, and next year’s $500K homes will be the ones selling at just over $490K today. By saving $25K during the year, this couple would be ahead only $5,000, because they’ll need to pay $10K more for the same house and they will have missed $10K in appreciation they would have had by being homeowners during the year. 

Even that $5K improvement might be taken away if interest rates increase during the coming year. Getting a good deal on a home purchase means doing well not only with the purchase price, but also the price of your mortgage. There’s no guarantee that rates will remain at the historically low levels where they are now.

Potential buyers who are holding off to avoid a perceived risk need to realize that they are banking on the market staying still, or moving in their favor. It might not happen that way.

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DAVID DUNLAP

As a residential real estate executive with an extensive background in corporate marketing, I am able to apply unusually strong skills in marketing communications, e-marketing, strategic planning and ....

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