As I’ve told many people the stars are currently aligned for first-time home-buyers. Grant it, there is a lot of uncertainty and anxiety amongst US workers right now and if the potential for job loss is high it would NOT be a good plan to buy a home.
However, for those who feel secure in their jobs and have been waiting for prices to fall it is a good idea to start getting serious. After all, mortgage rates for loans requiring only 3% down remain very attractive and I believe homes in Portland have become much more affordable over the past few months.
But if that isn’t enough to convince you consider the cost of waiting. I actually got this example from a book I recently read entitled “Borrow Smart Retire Rich”.
The table below illustrates the savings an individual will make over a 4 year period assuming they can save $4,000 per year We’ll assume that their savings earns 8% annually:
|1||$ 8,320.00||$ 320.00|
|2||$ 12,985.60||$ 985.00|
|3||$ 18,024.45||$ 2,024.00|
|4||$ 23,466.40||$ 3,466.00|
Conversely, here is a table that illustrates the cost of waiting. Here’s how much a $200,000 home will appreciate over the next 4 years assuming a 4% appreciation rate:
|1||$ 208,000.00||$ 8,000.00|
|2||$ 216,320.00||$ 16,320.00|
|3||$ 224,972.80||$ 24,972.00|
|4||$ 233,971.71||$ 33,971.00|
As you can see over a 4 year period even though the individual was able to save $23,466 towards a down payment the home that they could have purchased 4 years ago has now appreciated in value by $33,971. Therefore, this individual has actually lost $10,000 in waiting this long to buy a home.