What is the cost of waiting to buy a home in Denver these days? Working with buyers, I hear
a lot of the time, "I"m waiting to buy... to get a larger downpayment, for my lease to expire,
the timing to be right, the prices to come down, etc., etc., etc." Many of these are very valid
and real reasons and I certainly understand where buyers are coming from. However, after seeing this latest graph and stats, I feel it is my duty as an agent to let all buyers know how important it is to not wait to buy if you can manage it.
The great graph below was provided by Megan Aller with Land Title. Megan tracks the Denver Real Estate statistics better than anyone in Denver and the info she provides is always top notch and eye opening. The graph is pretty self explanatory but I'll point out what stood out to me. The average price in May of this year for a Denver home was $376,111. The projected average price for next May is $405,824. That's a difference of nearly $30,000! So I ask, is saving for a larger downpayment really worth it if you are spending $30,000 more for a larger downpayment? Odds are, by the time you save the money up, your percent down might actually be less than it is now with prices rising so quickly.
Another reason for waiting I hear a lot is that their lease doesn't expire for another year. Most leases require you to pay three months of rent to break a lease. Say the average rent is $1750 a month, that's a $5,250 buy out, much cheaper than what prices should be by the time your lease expires. I recommend running the numbers and seeing what makes the most sense.
With interest rates on the rise, along with prices, not only are you going to have to pay more for a home, your monthly payment is going to be a lot higher a year from now too. The average monthly payment now is $1,837 with an interest rate of 4.19% and next year, it will jump to $2,056 with a rate of 4.5%.
Most buyers stay in a house 5 to 7 years so the amount repaid isn't at the top of mind for most buyers. However, keep in mind that the majority of the interest you pay is in the first 5 to 7 years and very little of your monthly payment is going towards your principle. The higher interest rate and higher purchase price really do matter even if you are only going to be there for the average five to seven years.
Bottom line, there are many valid reasons for waiting to buy. But it is very important to reexamine those reasons and see if they really do make sense with prices and interest rates rising. Let me know if you want to talk about this further and figure out what your best strategy is.
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