Why Waiting To Buy A Home Until Next Year Could Cost You

Dated: May 6 2021

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Why Waiting to Buy a Home Until Next Year Could Cost You

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Many people in the Tampa Bay area are sitting on the fence trying to decide if now’s the best time to buy a home. These include renters who have a strong desire to become homeowners, but aren't sure if buying a home right now makes sense, homeowners who are realizing that their current home no longer fits their changing needs, and people who are relocating now that they have the option of working remotely.

To determine if you should buy now or wait another year, we have 2 simple questions:

  1. Do you think home values will be higher a year from now in the Greater Tampa Bay area of Florida?

  2. Do you think mortgage rates will be higher a year from now when you're ready to buy?

Let’s shed some light on the answers to these questions:

Where will home prices in Tampa Bay, FL be a year from now?

If you average the most recent projections from the major industry forecasters about the U.S. real estate market, the expectation is home prices will increase by 7.7% in the next year. Let’s take a house that’s valued today at $325,000 as an example.

If the buyer makes a 10% down payment ($32,500), they’ll end up borrowing $292,500 for their mortgage. Applying the projected rate of home price appreciation, that same house will cost $350,025 next year. With a 10% down payment ($35,003), they’d then have to borrow $315,022. So not only could your down payment increase by about $2503, your initial mortgage amount would also increase by about $22,523 in that time. 

What About Mortgage Rates?

Today, mortgage rates are hovering around 3%. However, most experts believe they’ll rise as the economy continues to recover. Any increase in the mortgage rate will also increase a purchaser’s cost. Here are the forecasts for the first quarter of 2022 from 4 major entities:

  • Freddie Mac – 3.5%

  • Fannie Mae – 3.5%

  • National Association of Realtors – 3.5%

  • Mortgage Bankers Association – 3.9%

The projections average out to 3.6% among these four forecasts, a jump up from where they are today. Click here to see how these changes can affect your monthly payment.

What does it mean to you if home values and mortgage rates increase?

A buyer will pay a lot more in mortgage payments each month if both of these variables increase. Assuming a buyer purchases a $325,000 home this year with a 30-year fixed-rate loan at 3% after making a 10% down payment, their monthly principal and interest payment would be $1,233.

That same home one year from now could be $350,025, and the mortgage rate could be 3.6% (based on the industry forecasts mentioned above). That monthly principal and interest payment, after putting down 10%, totals $1,432.

The difference in the monthly mortgage payment would be $199. That’s $2,388 more per year and $71,640 over the life of the loan.

Add to that the approximately $25,000 a house with a similar value would build in home equity this year as a result of home price appreciation, and the total net worth increase a purchaser could gain by buying this year is nearly $100,000. That’s a small fortune.

What about the eviction moratorium ending?

Recently, it was announced that the eviction moratorium that was put in place at the beginning of the pandemic was lifted. Predictably, there's a lot of speculation about how this will affect the housing market in Florida. Many are wondering if a flood of homes will hit the market as landlords evict non-paying tenants in the Tampa Bay area. 

Here's the thing though...with unemployment at just 4% in the Tampa Bay area, combined with record-low housing inventory, there is no shortage of home buyers or jobs in our area. However, we currently have LESS than 1 MONTH of housing inventory available in Pinellas County. In order for our housing market to 'normalize' which means home prices will begin appreciating at normal rates of about 4% per year again (NOT decline, just normalize to be clear), we would need 6-7 TIMES MORE housing inventory to make that happen. 

While it may be hopeful thinking that landlords will start dumping homes onto the market once non-paying tenants are evicted, the truth is that rents are rising in our area and there's no shortage of people needing rental housing either. 

Our prediction is that the end of the eviction moratorium will actually make even more investors that want to own rentals jump into our market, further increasing housing prices this year. 

Bottom Line

When asking if you should buy a home, many potential home buyers in Tampa Bay think of the nonfinancial benefits of owning a home. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year. 

If you have more questions about the Tampa Bay housing market and what moves you should be making, call (727) 400-3315 or message us at The Sandy Hartmann Group today. We'd love to speak with you!

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Andrea Hartmann

Andrea is the Managing Partner of The Sandy Hartmann Group and runs the team alongside Sandy Hartmann. She would love to talk to you about real estate! Andrea was born and raised in the Tampa Bay a....

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