Bottom Line Thinking
In life, patience is a virtue – but in the world of homebuying, waiting too long in hopes of finding the perfect home actually isn’t wise. That’s because the pursuit of perfection comes at a cost, and in this case, that cost may be delaying your dream of homeownership. As Bankrate explains:
“One of the most common first-time homebuyer mistakes is looking for a home that checks each of your boxes. Looking for perfection can narrow your choices and lead you to pass over good, suitable options for starter homes in the hopes that something better will come along.”
The Cost of Holding Out for Perfection
Nothing in life is ever perfect – and that’s true when you search for a home too. Unless you’re building a brand-new home from the ground up, chances are there are going to be some features or finishes you wouldn’t have picked yourself. It may be as simple as paint colors, a light fixture, the green carpet in the great room, or even that the backyard isn’t fenced in. It could also be that the home itself is great, but it’s not the ideal location you were hoping for.
But here’s the trade-off you’d be making without even realizing it. In all that time you’d spend searching for the perfect place, you’d overlook a lot of homes that would’ve worked for you. U.S. News explains:
“. . . you may miss opportunities if you enter the process with blinders on and aren’t open-minded . . . Countless potential buyers never buy because of this, and thus miss great investments or never move on to the next chapter of their lives.”
The Financial Impact of Waiting
Let me do the math for you. If you had bought a home last year, such as the one located at 17604 107th St Ct E, Bonney Lake, which sold on July 24, 2023, for $530,000, your monthly payment with 20% down ($106,000) at last year's rate of 6.78% would have been $2,758. BTW we have no connection to this house we are just using it as example.
Fast forward to today, and the same house would cost you $552,100 according to Zillow.com, a 4% increase. With a 20% down payment ($110,400) at today's interest rate of 6.89%, your monthly payment would be $2,905. That's a difference of $147 a month.
However, you'd need an additional $4,400 for the down payment, and you’d miss out on $22,100 in equity building that occured from last year to this year.
Now, let's jump forward one more year. If the home's value increases by 4% again, its new list price would be $574,184. You would need $114,837 for your down payment, which is $8,837 more than if you had purchased the home in 2023.
We averaged the interest rate between the two years and it came to 6.84%. With these numbers in mind, your new monthly payment would be $3,006.
This past year, I have been hearing from my buyers who say that they are wait for interest rates to drop. At the start of 2024, it was expected that the Fed would reduce rates 4-5 times this year. However, as of this blog post, they have not lowered rates even once. Relying on the Fed's decisions is risky. While you wait for these promises, home prices are continuing to rise.
All of this highlights the cost of waiting for the perfect home and interest rates to drop. Want to know what all of this math means for YOU?
If you wait one more year, the house will cost you $248 a month more and you will need to bring an additional $8,837 more for the down payment. You also will miss out potentially on $44,184 in increased vale. Now I realize I am forecasting the next year, but even if rates drop down and the house does not increase 4%, you can still see what just one year mean't to your bottom line.
How We Help You Explore Your Options
- Help You With The Numbers: First we can help you with the numbers and make sense of them based on the areas you are looking in.
- Elbow Grease: If you’re open to a home that needs a little elbow grease or is a bit further out, let us know. We’ll be happy to show you how this can really open up your pool of homes to pick from.
- Prioritizing Your Must-Haves: We will revisit your wish list and separate your non-negotiables from your nice-to-haves. From there, we’ll focus on what’s really most important to you and provide you with an updated list of options for you to choose from.
- Coaching You To See the Potential: As you tour homes, we will help you look beyond cosmetic flaws and imagine what the home could be lke with a little work. Simple updates like a fresh coat of paint or new flooring can make a big difference.
- Connecting You with Local Pros: And our support goes one step further. Depending on the level of repairs we can connect you with a lender that can do 203K loan so you can have the repairs done for you. If the repairs are smaller, we can connect you with local pros who can get the job done. That way it’s less work for you, and you don’t have to worry about tracking down contractors. Providing a higher level of service even after you close is what Rethinking Real Estate is all about.
Remember, there is no perfect first home. But with the expert help from our team and an open mind, we can find you the right home – even in today’s market. Connect with Rethinking Real Estate to see what’s out there for you and get starteted building equity, and personal wealth that could become generational.
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