According to the recent Home Price Index Report by CoreLogic, home prices have increased nationally by 6.7% year-over-year. During that same period, interest rates have stayed at near historic lows. This has allowed many buyers to enter the marketplace.
If you are selling your home, your concern is likely to be the short-term price (which is where the values are heading over the next few months). If you are positioned to be a homebuyer, your concern should not be the price but the long-term cost of owning the home.
Freddie Mac & Fannie Mae, and The MBA (Mortgage Bankers Association) all project that rates will increase by this time next year. If we reference the same Home Price Index Report as above, we see that home prices are set to appreciate by as much as 5.2% over the next 12 months.
What This Means if You Are a Buyer
If, as predicted, home prices appreciate by 5.2% over the next twelve months, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 in today’s market:
The Bottom Line
If your plan for this year is to purchase a home, doing so sooner rather than later could save you money up front and over the life of your loan.