Boston Real Estate for Sale

Should you buy now, or wait three years

Thinking about buying a home? If so, you’re probably wondering: should I buy now or wait? Nobody can make that decision for you, but here’s some information that can help you decide.

What’s Next for Home Prices?

Each quarter, Fannie Mae and Pulsenomics publish the results of the Home Price Expectations Survey (HPES). It asks more than 100 experts—economists, real estate professionals, and investment and market strategists—what they think will happen with home prices.

In the latest survey, those experts say home prices are going to keep going up for the next five years (see graph below):

 a graph of green bars

Here’s what all the green on this chart should tell you. They’re not expecting any price declines. Instead, they’re saying we’ll see a 3-4% rise each year.

And even though home prices aren’t expected to climb by as much in 2025 as they are 2024, keep in mind these increases can really add up over time. It works like this. If these experts are right and your home’s value goes up by 3.78% this year, it’s set to grow another 3.36% next year. And another 3.87% the year after that.

What Does This Mean for You?

Knowing that prices are forecasted to keep going up should make you feel good about buying a home. That’s because it means your home is an asset that’s projected to grow in value in the years ahead.

If you’re not convinced yet, maybe these numbers will get your attention. They show how a typical home’s value could change over the next few years using expert projections from the HPES. Check out the graph below:

 a graph of growth in a chart

In this example, imagine you bought a home for $400,000 at the start of this year. Based on these projections, you could end up gaining over $83,000 in household wealth over the next five years as your home grows in value.

Of course, you could also wait – but if you do, buying a home is just going to end up costing you more. 

Boston Condos and the Bottom Line

If you’re thinking it’s time to get your own place, and you’re ready and able to do so, buying now might make sense. Your home is expected to keep getting more valuable as prices go up. Let’s team up to start looking for your next home today.

Updated: Boston condos for sale 2024

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Should you buy now, or wait three years

A reader sent me an email with a question about rising interest rates and lower home prices.

It started me thinking, how high would interest rates have to go to offset lower home prices?

I think a case could be made that the average and median home price in Massachusetts (and across the US) might drop over the coming year or two (although prices haven’t dropped, at all, even as the number of properties on the market has increased).

What will interest rates do over the coming couple of years? Go up a point? Two? Can’t be more than two, right?

So, consider this scenario:

Imagine you are thinking about buying a $500,000 home today, but also considering putting it off for three years.

Buy today:

New home price: $500,000
Current mortgage loan interest rate: 6% (30-year fixed rate)
Monthly mortgage loan payment (no down payment): $2,997

In three years:

New home price: $400,000 (assumes a 20% drop in home prices)
Projected interest rate: 8% (30 year fixed rate)
Monthly mortgage loan payment (no down payment): $2,935

So, coincidentally, your monthly payment will be almost exactly the same, if home prices drop 20% but home loan interest rates go up 2%.

If you think prices will drop by more than 20%, or think interest rates will increase less than 2% over the coming years, then you could conceivably wait, and end up spending less, per month.

(Be serious, are you going to wait? If you want to buy, now, you’re going to buy, now.)

But, there’s one other variable.

What if you’re selling a home, in order to buy a new one?

If you sell today, will you make more of a profit than you will in 3 years? In this scenario, you will. Remember, you are hoping home prices drop by 20% over the next three years – but that’ll hurt you when you sell your own home, too.

Suppose you are selling a $400,000 home, and that you have half of it paid off, or $200,000. That means the remainder will be your profit – $200,000.

But, suppose within 3 years, the market has softened, and prices have dropped in your town by 15%. This means you can only sell your home for $340,000, instead of $400,000.

Your profit just went down $60,000, to $140,000!

Here are the revised figures:

Buy today:

New home price: $500,000
Down payment: $200,000
Current mortgage loan interest rate: 6% (30-year fixed rate)
Monthly mortgage loan payment (no down payment): $1,798.00

In three years:

New home price: $400,000 (assumes a 20% drop in home prices)
Down payment: $140,000 (assumes you sell your current home for 15% less, or $60,000)
Projected interest rate: 8% (30 year fixed rate)
Monthly mortgage loan payment (no down payment): $1,907.00

So, you’ll end up paying $109 more, per month, three years from now, if interest rates go up by 2%, even if home sales prices go down.

Of course, if you rent now, or sell your home, rent for three years, then get back in, you might be able to work the market in your favor.

Why play that kind of game?

I guess I don’t think interest rates will be going up much, within two to three years – certainly not above 9%, at the most, right? I don’t think the housing market will see anything close to a 20% drop, either, but I’m just not sure.

Contact me to find to set up an appointment to start your Boston condo buying process.

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Updated: Boston condos for sale 2024

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