Should I wait for the market to cool down before buying? Monday Minute November 30, 2020

Question: Should I wait for the market to cool down before buying?Right now, we are in a seller's market with homes going well above list price with multiple offers on the table making. This a much tougher market for buyers and we've had a lot of clients asking should I wait for the market to cool down before making a move. Well, that's going to depend on quite a few different factors but let's look at some of those.The first thing to consider is that when the market does start to slow down that does not mean that prices are necessarily going to be lower and also doesn't necessarily mean they're going to be the same as today. Right now, we're seeing a consistent rise in home values because these home values are not arbitrarily being overvalued by bought appraisals like we saw in 2005 to 2007. The likelihood of home prices being somewhere between 2-5% higher in the next 6 to 12 months is highly likely. This means that paying even $30,000 more than the list price right now may be basically the same as what you'll be paying come this time next year.Secondly the idea of waiting also assumes that the interest rates will continue to stay as low as they are today. Although experts aren't anticipating the interest rates are going to dramatically increase, it is expected that there may be some increases over the next year. We have seen, since the beginning of this year, on average even a difference of one-half percent in an interest rate spending $20,000 to $30,000 more, the monthly payment would be the same or less.For example: if you were to purchase a home, let's say for $400,000 at a 4% interest rate that mortgage payment would be $1,976, whereas if you would have purchased that same home at a purchase price of $425,000 at an interest rate of 3.5% that mortgage payment would be $1,975. That's only assuming that interest rates went up and prices stayed the same. The most likely scenario is that the home price has also gone up and you are paying $425,000 at 4%. Which for comparison that would be $2,095 a month.Now alternatively, if the idea of overpaying doesn't feel right to you and you aren't limited to the location, i.e. neighborhood or school district, there are some areas and neighborhoods that are not in the hotter purchase areas where we're seeing most of the activity. In these areas you may be able to find yourself a deal paying list price and, in some cases, even a bit less.