Jun 8, 2015
According to the Opportunity Cost Report released by Realtor.com, interest rates and home prices are expected to climb in the next year, and the financial penalties of waiting to purchase a home in today’s market have become very steep.
The report focuses on a wide range of factors, including the long-term financial impact of owning a home versus renting, the monetary gain renters forego in waiting to buy a home, and the financial benefits of homeownership by market.
Jonathan Smoke, chief economist for Realtor.com believes “current market conditions give buyers the opportunity to build substantial wealth in the long-term, compared with renters and later buyers, in advance of the projected increase in mortgage rates and continuing price appreciation.” He goes on to say the problem is low inventory. This has many potential homebuyers (especially first-time homebuyers) “standing on the sidelines” and missing out on potential financial gains.
The estimated wealth a buyer would accumulate over a 30-year period totals $217,726 on average. Some markets are more buyer-friendly than others, but national data shows that homeowners see significant benefits compared to lifetime renters. In 88% of MSAs, purchasing a home produces a financial gain of at least $100,000 over a 30-year timespan.
Ten markets offer an exceptional upside to owning a home, with estimated 30-year gains above $500,000, and opportunity costs of waiting three years as high as $200,000. These MSAs are expensive housing markets with strong demand and limited supply, mostly in California and western states. The potential long-term wealth in these areas is the greatest in the nation, and the long-term financial penalty for waiting to own is also substantial – due to price appreciation, increased rent costs, and higher mortgage rates.
“This analysis looks solely at the financial reasons to buy a home, based on assumptions about rising mortgage rates and changes in home values,” says Jonathan Smoke. “It’s important to remember that a home purchase decision is deeply personal. Potential buyers need to consider factors such as upcoming life events, job security, and potential relocation, in addition to financial benefits, because they, too, can have a significant impact on ownership.”
If you want to make a little piece of The Island your own, you need more than just a road map and a REALTOR. You need a partner who can make things happen.
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