Now that the new year has arrived it is time for buyers and sellers that have been holding back, waiting for a picture of what this new year will be like, to make a decision – buy now or continue to play the ‘waiting game’.

 

Whether renting, and desire to become a homeowner; a homeowner considering the sale of your current house because it no longer fits your needs or you simply want to move up or scale back – you might be thinking that waiting six months to a year could mean a better market.

As you’ll see, this could be one of the very best times to sell or buy with prices still rising and interest rates just beginning to creep up above historic lows with additional increases expected throughout 2022, according to the experts.

There are two basic questions you should be asking regardless of whether you are buying or selling:

  • What is likely to happen to home prices in 2022? Although the outrageous prices we’ve experienced this last year have begun leveling off slightly prices will continue to go up based on the number of people relocating to our area. 
  • Where will mortgage rates be by the end of 2022? A very important question unless you’re buying with cash!

Let’s get some answers to both questions from the experts and see what waiting six months to a year could cost you.

What will home prices be like in 2022?

There are three major housing industry entities that forecast continued home price appreciation for 2022. Here are their nationwide forecasts:

  • Freddie Mac: 5.3%
  • Fannie Mae: 5.1%
  • Mortgage Bankers Association: 8.4%

Now, let’s check the local Dallas-Fort Worth Metroplex (DFW) outlook. According to the Texas Real Estate Research Center at Texas A&M the forecast is for home prices to slack off a bit from this past years double-digit growth but still be in the 9% to 10% range due to the continued hot job market bringing an influx of new residents as well a continued tight housing supply.

As home prices in the DFW metroplex continue to rise well above the national average let’s look at a home valued today at $450,000 with a 9% appreciation. At the end of 2022 this home would be valued at $490,500 or an increase of $40,500 above the purchase price. This begs the question can you really afford to wait and lose over $40,000 in potential equity or worse find yourself priced out of the home you want?

The other basic question to be answered is mortgage rates – what will happen to them in a growing inflationary market?   

Where are mortgage rates expected to be by the end of 2022?

The interest rate on a conventional, 30-year fixed rate mortgage is still just begun creeping above historic lows. According to Bankrate® the current rate for a 30-year fixed rate mortgage in the DFW metroplex varies from 2.625% to 3.865% depending on credit score and other lender qualification factors. Most economists and industry experts believe rates will continue to rise slightly as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:

  • Freddie Mac: 3.8%
  • Fannie Mae: 3.2%
  • Mortgage Bankers Association: 4.2%

The average of these three forecasts comes out to 3.7% which is more than a full percentage point higher than the lowest current rate for a 30-year, fixed rate mortgage.

Increases in the mortgage rate will increase your total cost of home ownership. Your monthly payment will increase, Private Mortgage Insurance or PMI (typically 1% of the loan, if required) as well as how much you will have paid at the end of the loan.

What do rising home prices and mortgage interest rates mean?

Very simply, it means that you will pay more for the home you want, if you can still afford it, because in some cases you may not be able to meet the lender qualifications.

Let’s assume you purchase our example $450,000 home this year with a current 2.625%, 30-year fixed-rate loan. After making a 20% down payment your monthly mortgage payment (principle and interest only) will be $1,445 according to the mortgage calculator from Smart Asset®.

However, waiting until the end of 2022, the same or comparable home in the DFW metroplex is projected to cost $490,500 and a 30-year fixed-rate conventional mortgage could be 3.7% based on the industry forecasts above. This brings the monthly mortgage payment (principle and interest only) to $1,806 – a difference in the monthly mortgage payment of $361. Yet, there are more escalations to be considered such as home insurance that is also based on the valuation of the home, so $361 is just a start, assuming you still qualify!

One of the basic mortgage qualification criteria is a mortgage-to-income ratio of 28%. This means the mortgage payment cannot be greater than 28% of your gross income. To still qualify for a comparable home at $490,500 you would need to show the lender approximately $15,000 in additional annual gross income for the same house at the end of 2022 versus buying it now in early 2022! 

Bottom Line

When considering the purchase of a home, you are likely motivated by some of the non-financial benefits, such as security, stability, privacy and control over your living space.

However, it is the financial benefits that can make it clear that doing so today is much more advantageous than waiting for six months to a year. Remember the old adage, nothing gets cheaper with time.”

Give me a call at 469-556-1185 if you’re interested in buying a home because we have access to many homes, some even pre-market, through our network of Realtors built over nearly 4 decades in this area.

If you are selling, we have more than a hundred of Five Star Reviews. a consistent track record of above market price sales with multiple offers for our listing clients, not to mention very short Days On Market.

One question we’re frequently asked is ‘with such a “hot” market how can I sell when I can’t make an offer on a home until mine is sold. Either way I am taking a big risk!’

I have several solutions for you to consider that can allow you to move out of your current home and into your new home with relative ease. Give me a call and let’s discuss your goals and what we can do for you – no cost / no obligation.  

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We’re always interested in your feedback or suggestions on topics you’d like to see in a blog or in our newsletter, so please feel free to let us know at RealEstate@GeniManning.com.