Are you still wondering if this is a good time to purchase real estate? Should you wait for a more stable housing market? All your questions are answered by Jack Ma! As the market shifts from a sizzling hot seller’s market to now a slight seller’s market. Many people are expecting the price to go down. Some even expect the price to crash. So one of the most common questions we get asked nowadays is… Should I buy now or wait until the price drops to buy? 🤔
Let’s assume the answers I have for the questions is as shown….
After talking to a few lenders and their consensus is that the interest rate will get to about 7% by end of the year. So I will use 7% for the expected interest rate.
Knowing that in Southern California, even at the worst real estate market, the price is down about 25-30%, I am going to use 10% price drop for the second question
People in the past move on average of every 10-15 years… even tho people have been staying at
their home longer and longer….I will use 10 year as the answer to my third questions.., OK…this is how it is going to work…. Assuming by waiting the price drops 10%, an $1,000,000 home will become$900,000, so my potential saving is $100,000.
By waiting that also means that interest rate will go up to 7%, 2% more than today’s 5%. So I will be paying 2% more each year.
So the interest payment on the $800,000 loan at 5% interest rate and holding it for 10 years = $400,000
If I waited, the interest payment on that then $700,000 purchase at 7% interest rate and holding it for the same 10 Yeats will be = $490,000
So in this case, the additional interest incurred by waiting will be $90,000 and the potential saving on price reduction is $100,000. So I did save $10,000. Now the question I have to ask myself is that which is more important for me….. Holding off the purchase for $1,000 saving a year over 10 years or move into this dream house I want to buy and create a better lifestyle for my family.
