Boston Condos for Sale & Boston Apartments for Rent
Are you buying a Boston condo in 2021 or 2022?
If you’re a homeowner who’s decided your current house no longer fits your needs, or a renter with a strong desire to become a homeowner, you may be hoping that waiting until next year could mean better market conditions to purchase a home.
To determine whether you should buy now or wait another year, you can ask yourself two simple questions:
Where will Boston condo prices be a year from now?
Where will mortgage rates be a year from now?
Let’s shed some light on the answers to both of these questions.
Where Will Home Prices Be a Year from Now?
Three major housing industry entities are projecting ongoing home price appreciation in 2022. Here are their forecasts:
Fannie Mae: 7.4%
Freddie Mac: 7%
Mortgage Bankers Association: 5.2%
According to the National Association of Realtors (NAR), the median price of a home today is $353,900. Using an average of the three price projections above (6.53%), a home that sold for $353,900 today would be valued at $377,010 at the end of next year. As a prospective buyer, you would therefore pay an additional $23,110 by waiting.
Where Will Mortgage Rates Be a Year from Now?
Today, Freddie Mac estimates the average 30-year fixed mortgage rate in the fourth quarter of this year will be 2.8%. However, most experts believe mortgage rates will rise as the economy recovers. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
Fannie Mae: 3.4%
Freddie Mac: 3.8%
Mortgage Bankers Association: 4%
That averages out to 3.73% if you include all three forecasts. Any increase in mortgage rates will increase your costs.
What Does It Mean for You if Home Values and Mortgage Rates Increase?
If both variables increase, you’ll pay a lot more in mortgage payments each month. Let’s assume you purchase a $353,900 home in the fourth quarter of this year with a 30-year fixed-rate loan at 2.8% after making a 10% down payment. According to mortgagecalculator.net, your monthly mortgage payment would be approximately $1,309 (this does not include insurance, taxes, and other fees because those vary by location).
That same home one year from now could cost $377,010, and the mortgage rate could be 3.73% (based on the industry forecasts mentioned above). Your monthly mortgage payment after putting down 10%, would be approximately $1,568.
The difference in your monthly mortgage payment would be $259. That’s $3,108 more per year and $93,240 over the life of the loan.
Add to that the approximately $23,110 a house with a similar value would build in home equity this year due to home price appreciation, and the total net worth increase you could gain by buying this year is over $115,000 (the $93,240 mortgage savings plus the $23,110 potential gain in equity if you buy now).
Boston Condso for Sale and the Bottom Line
When asking if you should buy a home, you may think of the non-financial benefits of homeownership. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
Boston Condos for Sale & Boston Apartments for Rent
______________________________________________________________________________________________________________________________
Boston real estate for sale
There’s no doubt 2020 has been a challenging year. A global pandemic coupled with an economic recession has caused heartache for many. However, it has also prompted more Americans to reconsider the meaning of “home.” This quest for a place better equipped to fulfill our needs, along with record-low mortgage rates, has some thinking about buying a Boston condo for sale
This increase in demand, on top of the severe shortage of homes for sale, has also caused more bidding wars and thus has home prices appreciating rather dramatically. Some, therefore, have become cautious about buying a downtown condo right now.
The truth of the matter is, even though homes have appreciated by a whopping 6.7% over the last twelve months, the cost to buy a home has actually dropped. This is largely due to mortgage rates falling by a full percentage point.
Buying a Boston condo
Let’s take a look at the monthly mortgage payment on a $300,000 house one year ago, and then compare it with that same home today, after it has appreciated by 6.7% to $320,100:Compared to this time last year, you’ll actually save $87 dollars a month by purchasing that home today, which equates to over one thousand dollars a year.
But isn’t the economy still in a recession?
Yes, it is. That, however, may make it the perfect time to buy your first home or move up to a larger one. Tom Gil, a Harvard trained negotiator and real estate investor, recently explained:
“When volatile assets are facing recessions, hard assets, such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”
That thought is substantiated by the fact that homeowners have 40 times the net worth of renters. Odeta Kushi, Deputy Chief Economist for First American Financial Corporation, recently said:
“Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.”
Boston Condos for Sale and the Bottom Line
With home prices still increasing and mortgage rates perhaps poised to begin rising as well, buying your first home, or moving up to a home that better fits your current needs, likely makes a ton of sense.
