DELAWARE COUNTY, PA, BUY THAT HOUSE NOW OR WAIT, HOW TO DECIDE

BUY NOW OR WAIT FOR A YEAR

In Delaware county, in South Eastern Pennsylvania (and most of the rest of the country for that matter), tens of thousands of people are wondering if they should buy that house now or wait to decide. Well, wonder no more. Here are two straight forward ways to think through your situation and make the decision that will make the most money for you.

• FIRST TIME BUYER
• MOVE UP SELLER/BUYER

There are really only two variables that factor into your decision. Home Prices and Interest Rates, since almost all buyers will need to take out a mortgage for their purchase.

To make your decision, you need to estimate by how much and in what direction house prices will change in the next year. To get a sense of how wild this has been for the last 10 years, please look at the below graph.

It shows the average resale price of a home in 20 cities across the USA (it was 10 cities before 2000). Both graphs show the same pattern. Prices peaked in 2006, fell real fast for four years, leveled off for another four and look like they began an uptrend in 2012.

In Pennsylvania, we have been lagging behind that uptrend, primarily because we have been working off an huge inventory hangover. The below graph tells us why this is so.

Two years ago we had over 10 months of inventory; that means a buyers market with declining prices; good for buyers; not so good for sellers.

A year ago we had 7.5 months of inventory; still a buyers market with declining prices. Again, good for buyers; not so good for sellers.

Now we are down to 6 months of inventory which means that we are in an even market where prices are stable. However, inventories are going down and that means we are heading back into a sellers market with rising prices; good for sellers; not so good for buyers.

However, in our area, we have not  yet seen much of an upward price change.

Bear in mind that these are county wide averages that show house prices as flat or up maybe 4% in the last two years. Compare this to the national average Case Shiller Graph with shows an average price of about $138,000 in mid 2012 and an average price of about $165,000 In 2013. That is an increase of 16%. Now that our inventories are getting more normal,we can also begin to expect more appreciation.

The last piece of the puzzle is interest rates. We have been at historic lows for some time, about 3.5% a year ago. Now we are at 4.25%. Major forecasts continue to show expected increases as shown below.

FIRST TIME BUYER

• Compare buying now with buying a year from now
• 10% down on the new purchase
• 4.25% interest rate now
• 5.1% interest rate a year from now
• Houses appreciate at 5% in the next year
• Buyers stay in the new house for 10 years
• Purchase price now - $250,000
• Mortgage now for $225,000
• Purchase price a year from now is $262,500
• Mortgage a year from now is $236,250
• Buy now, the monthly payment is $1,106.86
• Buy a year from now, the monthly payment is $1,282.72
• That is a difference of $175.86 a month more if you wait
• That is a difference of $2,110.32 a year
• That is a difference of $21,103 over the 10 years the buyer is assumed to stay in the home
• The lesson, every day you wait your first home buying deal wil be more expensive.

MOVE UP BUYER

• Compare buying now with buying a year from now
• 10% down on the new purchase
• 4.25% interest rate now
• 5.1% interest rate a year from now
• Houses appreciate at 5% in the next year
• Buyers stay in the new house for 10 years
• Present house will sell for $300,000 now
• Move up house will sell for $450,000 now
• Your move up cost differential is $150,000 if you buy now.
• Mortgage now is $405,000
• Present house will sell for $315,000 a year from now
• Move up house will sell for $472,500 a year from now
• Your move up cost differential is $157,500 if you move up a year from now. That is more money that you must finance to get the same house.
• Mortgage a year from now is $425,250
• Mortgage payment now is $1,992.36
• Mortgage payment a year from now is $2,198.95
• That is a difference of $206.59 a month if you wait.
• That is a difference of $2,479.08 a year
• That is a difference of $24,791 over the 10 years the buyer is assumed to stay in the home
• The lesson, every day you wait your first home buying deal wil be more expensive.

THE LESSON, THIS IS THE BEST OPPORTUNITY TO BUY A HOUSE THAT WE WILL SEE FOR THE REST OF OUR HOME BUYING LIFETIME.

SECOND LESSON, IT SHOULD STILL BE GOOD A YEAR FROM NOW, BUT NOT AS GOOD AS IT IS NOW.

Please click here to get started on making your decision now. No cost or obligation of course.

Wonder if you have enough equity in your home to make a move? Click here and find out.