Two Reasons Why Waiting a Year To Buy Could Cost You
If you’re a renter with a desire to become a homeowner or a homeowner who’s decided your current place no longer fits your needs, you may be hoping that waiting a year might mean better market conditions to purchase a condo or home.
To determine if you should buy now or wait, you need to ask yourself two simple questions:
- What will home prices be like in 2022?
- Where will mortgage rates be by the end of 2022?
Let’s shed some light on the answers to both of these questions.
What will home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:
- Freddie Mac: 5.3%
- Fannie Mae: 5.1%
- Mortgage Bankers Association: 8.4%
Using the average of the three projections (6.27%), a condo that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait.
Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
- Freddie Mac: 3.8%
- Fannie Mae: 3.2%
- Mortgage Bankers Association: 4.2%
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.
What does it mean for you if both home values and mortgage rates rise?
You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 condo or home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.
That same condo or home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166.
The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.
If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.
Bottom Line
When asking if you should buy a condo or home, you probably think of the non-financial benefits of owning property as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
What Are the Experts Saying About Future Condo Prices?
A worldwide pandemic and an economic recession have had a tremendous effect on the nation. The uncertainty brought about by both has made predicting consumer behavior nearly impossible. For that reason, forecasting prices has become extremely difficult.
Normally, there’s a simple formula to determine the future price of any item: calculate the supply of that item in ratio to the demand for that item. In housing right now, demand far exceeds supply. Mortgage applications to buy a home or condo just rose to the highest level in 11 years while inventory of homes and condos for sale is at (or near) an all-time low. That would usually indicate strong appreciation for values as we move throughout the year.
Some experts, however, are not convinced the current rush of purchasers is sustainable. Ralph McLaughlin, Chief Economist at Haus, explained in their June 2020 Hausing Market Forecast why there is concern:
“The upswing that we’ll see this summer is a result of pent-up demand from homebuyers and supply-in-progress from homebuilders that has simply been pushed off a few months. However, after this pent-up demand goes away, the true economic scarring due to the pandemic will begin to affect the housing market as the tide of pent-up demand goes out.”
The virus and other challenges currently impacting the industry have created a wide range of thoughts regarding the future of home prices. Here’s a list of analysts and their projections, from the lowest depreciation to the highest appreciation:
- CoreLogic: Year-Over-Year decline of -1.5%
- Haus: Year-Over-Year decline of -1%
- Zillow: Year-Over-Year change is forecasted to bottom out at -0.7%.
- Home Price Expectation Survey: Decline of -0.3% in 2020
- Fannie Mae: Increase of 0.4% in 2020
- Freddie Mac: Increase of 2.3% in 2020
- Zelman & Associates: Increase of 3.0% in 2020
- National Association of Realtors: Increase of 3.8% in 2020
- Mortgage Bankers Association: Increase of 4.0% in 2020
We can garner two important points from this list:
- There is no real consensus among the experts.
- No one projects prices to crash like they did in 2008.
Bottom Line
Whether you’re thinking of buying or selling a condo or house, know that prices will not change dramatically this year, even with all of the uncertainty we’ve faced in 2020. If you’d like more information or to learn about your specific condo or home value, contact us, the Ann Arbor Condo specialists today at 734-761-3060 or info@condohotline.com.
Ann Arbor Condominium Report for July 2019
Condo Prices Declining
Both listing and selling prices for Ann Arbor condos have significantly decreased in comparison to last year’s statistics. In the past month, 74 units were listed and this is a 22.1% decline compared to the 95 entered into the MLS the July prior. The average listing price has dropped a considerable 35.4% from $415,405 to $268,219 presently. Compared to July 2018, there has only been a slight rise in the amount of sold condos, 64 versus 68 units. Similar to the ALP, the average selling price has also declined, from $323,768 to $275,919, a 14.8% decrease. Unfortunately for sellers the average days on the market for this July has tripled to 40 days. (more…)
No Worries… Condo Prices Coming in for a SOFT Landing
Condo prices have appreciated considerably over the last five years. This has some concerned that we may be in for another dramatic correction. However, recent statistics suggest condo values will not crash as they did a decade ago. Instead, this time they will come in for a soft landing.
The previous housing market was fueled by an artificial demand created by mortgage standards that were far too lenient. When this demand was shut off, a flood of inventory came to market. This included heavily discounted distressed properties (foreclosures and short sales).
Today’s market is totally different. Mortgage standards are tighter than they were prior to the last boom and bust. There is no fear that a rush of foreclosures will come to market. The Mortgage Bankers’ Association just announced that foreclosures are lower today than at any time since 1996.
Case Shiller looks at the percentage of appreciation as compared to the same month the year prior. Here is a graph of their findings over the last ten months:
As we can see, home price appreciation is softening as more inventory comes to market. This shows that real estate prices are not crashing, but merely returning toward historic appreciation numbers of 3.6% annually.
Bottom Line
Home and condo prices are leveling off. Long term, that is a good thing for the housing market. It’s especially good for condo buyers! Contact us today at 888-581-6923 to learn more about the Ann Arbor Condo market and your purchasing options!
Ann Arbor Condo Report – January 2019
Decline in Listing and Selling Prices for Ann Arbor Condos
Ann Arbor condos have seen a decline in many facets this new year. 38 units were listed this January, only a 5% decrease from the 40 sold the previous January. The average listing price declined 16.4%, $334,687 versus the $400,116. The great news for sellers is that 35 units were sold, which considering only the 38 units entered in January, means that 92% of the condos listed were theoretically sold. Further, compared to the first month of 2017 when only 23 condos, January 2019 saw a 52.2% rise in condos sold. Selling prices declined though, from $327,434 to $297,333, a 9.2% lower. Unfortunately for sellers, the average days on the market is extremely high at 76 days.
For all your condominium quandaries and questions, contact the condo specialists with The Bouma Group at 734-761-3060 or email info@condohotline.com. Keep up with our blog for all the information you need to know about Ann Arbor condos and surrounding areas!
Ann Arbor Condo Report – November 2018
New Inventory Added for Ann Arbor Condos Skyrocket
Ann Arbor condos have seen a drastic increase in the amount of condominiums entered into the multiple listings service this November. A total of 57 units were added, and this is a significant increase of 90% compared to the mere 30 units entered the previous November. The average listing price has seen a 9.6% increase from $347,111 to $380,532 currently. In this past month, 47 homes have been sold in comparison to the 53 in November 2017, a decline of 12.8%. The average sale price is $247,715, which is only a slight decrease from $251,296 the prior November. Unfortunately for sellers, there has also been a considerable 90% decline in the average days on the market, 20 versus 38 days.
So far this year, 750 condominiums have been listed for sale, this is a 10.5% increase from the 679 condos that had been entered at this time last year. The ALP has increased by 18.2%, $297,269 versus $351,490 this year. A total of 509 condos have been sold in 2018, in comparison to the 589 that had been sold by November in the previous year, a 13.6% decline. Cumulatively, the ASP is $283,492 thus far, which is a 11.4% rise compared to $254,502 in 2017.
Whether you are looking to buy or sell a condo, contact the experts with The Bouma Group at 888-581-6923 or email info@condohotline.com. Check back here for all the information you need about Ann Arbor condos and surrounding areas!
Ann Arbor Condo Report Update – October 2018
Ann Arbor Condo Buyers get to Experience the Best of Both Worlds
Luckily for Ann Arbor condo buyers, this October has seen almost a doubling in the amount of new listings entered and sale prices have decreased compared to the previous October. The increase in inventory is a significant 75.7%, from 37 units entered October 2017 to 65 entered this past month. Listing prices have also risen, $337,260 versus $371,708 now, which is a 10.2% increase. But like stated earlier, average selling prices have decreased, $265,636 this past month compared to $273,483 last year, this is only a small difference though. A total of 35 units were sold this past month, which is a 14.6% decline compared to the 41 sold the previous October. The average days on the market has stayed consistent with 26 days. Yearly statistics are not great for sellers, as there has been more listings entered and sale prices are lower than listing prices on average. So far this year, 694 units have been entered, which is 7.1% more than the 648 units that had been entered at this time in 2017. The average listing price has seen a considerable increase of 18.6%, from $294,766 to $349,448. Currently the ASP for this year is $287,748, which is a 13.1% rise from last year’s $254,447; but still lower than the ALP. In total, 461 condominiums in Ann Arbor have sold in 2018, versus the 535 units in the year prior, a 13.8% decline.
The condo specialists with The Bouma Group are capable of helping you with any and all of your condo needs, contact us at 888-581-6923 or email info@condohotline.com. Stay tuned for more information about the Ann Arbor condo market and surrounding areas!
Ann Arbor Condo Report – September 2018
Good News for Ann Arbor Condo Buyers, Selling Prices are Well Below Listing Prices
Listing prices are higher than last year, but luckily for those looking to buy an Ann Arbor condo, the selling price is at least 15% below the listing price! Asking prices are a significant 27.6% more than September 2017, $252,922 versus $322,848 currently. This may be because of the decrease in the amount of listings entered, from 60 condos to 52, which is a difference of 15.4%. Although the sale prices may seem unfortunate for condo sellers, there is some good news for them! 50 units sold this September, which means that almost as many units sold as were entered into the system. This is also an increase of 6.4% compared to the 47 condos sold in last September. Additionally, condos are on the market for less days, from 33 average days on the market to 24 currently. The average selling price is $233,240, which is a decrease of 8.9% compared to the ASP $255,912 in the previous September. Looking at year-to-date statistics, there has been a rise in the amount of condos entered into the multiple listings service but a decline in the amount of sales. From 611 units sold last year at this time to 629 units sold as of now, this is an increase of 21.3%. The average listing price has risen 19.5% to $347,344 so far this year, compared to $292,271. Thus far in 2018, 427 condos have been sold, which is a decline of 13.5% from the 494
condos sold last year at this time. The ASP has seen an increase of 14.3%, from $252,867 to $288,938 at the moment.
Whether you are looking to buy or sell an Ann Arbor condo, contact the condo specialists today at 888-581-6923 or email info@condohotline.com. Stay tuned for more updated market statistics!