With interest rates and home prices expected to continue increasing, does it make sense for you to rethink your homebuying timeline?

Last year Seattle area prices increased 12.8%, and interest rates increased . 375% since December. Economists are expecting rates to get to 5.25% by the end of this year by (up from around around 4.5% right now). Many experts are predicting another 12% increase in home prices this year too.

So let’s do some quick math. If prices increase by 12% over the next 12 months, today’s $700,000 house will cost you $784,000 next year.

Now let’s look at what your monthly payment would be if interest rates increase from 4.5% today to 5.25%. With a 5% downpayment on a $700,000, your monthly mortgage payment will increase $302/month.

So are you saving money fast enough for it to make sense to wait to buy?

I know a lot of people are waiting to buy until they save that traditional 20% for a downpayment. Did you know that more than half of the clients we’ve helped buy houses so far this year in Seattle are putting only 5% or 10% down on their purchase? Remember, you don’t need to have a 20% downpayment like your parents did! There are many loan programs that allow a 5% downpayment or lower.

Do you know the difference in downpayment between 5% and 20% on a $700,000 house? (Spoiler, its a $105,000 difference!) Watch the super quick one and a half minute long video above to see the breakdown.

So if you want to wait another year to try and save for a larger downpayment, the same house that you could buy today at $700,000 would be priced at $784,000, and a $700,000 house could cost you $302 more a month in mortgage payments.

Are you stuck in a lease? We recently wrote an article sharing ways to get out of a lease that isn’t on the same timeline as your buying ambitions. One idea mentioned is that you can pay to break your lease. Sometimes when you run the numbers that actually makes a lot of financial sense.

If homes increase 12% over the next year, that breaks down to a $7000/ month increase. If it costs you 2 months rent to break you lease, it probably makes sense to break it sooner than later before prices and interest rates increase more.

Lastly, this isn’t a math based reason but a rather important one. Inventory is at an all time low in Seattle. In an average balanced market, we would have 6 months worth of homes for sale. Right now we have about 3 weeks of inventory. This inventory is expected to increase as we head into the summer when we hit our annual peak. Since we’re entering the highest inventory levels of the year very soon, this is another reason to rethink your buying timeline.

So again I ask you to recalculate these numbers for yourself. Does it make sense for you to wait, or does it make more sense for you to push up your buying timeline? I have a feeling that many of you might want to scheduled a time to meet up for a beer or coffee soon to chat about your specific situation. If that’s you, just visit AwesomeNossum.com/Schedule and select a time to meet up with me for an initial consultation. It’s free, there’s never any pressure, and I’ll help you do the math on your specific situation to see what makes sense for you. We want to help you create the best buying strategy, whether that includes buying now or waiting a while.

PS. If you think a 5% downpayment won’t win in a multiple offer situation, you’re very wrong. With the strategies that we advise you to use (while also protecting you), we often have 5% down offers beat all-cash offers. Schedule a time to meet up for a beer or coffee at AwesomeNossum.com/ Schedule.

Christian Nossum Owner/Agent