How Much Waiting to Buy Could Cost You
If you’ve been on the fence about buying a home now or delaying your purchase until next year, you’ll want to pay attention to this: The house you can afford today may be out of reach a year from now due to rising interest rates and home price appreciation.
To put a dollar figure on it, Zillow applied next year’s forecasted home values and a 1 percentage point interest rate increase to the median home price in 35 metros around the country. We used that to calculate the difference in mortgage payments. The results may surprise you.
“More often than not, buyers do not understand the profound effect of rising interest rates on affordability,” said Erin Lantz, vice president of mortgages at Zillow. “Many buyers associate a 1 percentage point interest rate change with a 1 percent change on a piece of clothing or the price of a car, when in fact they are very different.”
As a rule of thumb, Lantz said, a 1 percentage point increase in mortgage rates reduces affordability by 10 percent.
Of course, buying a home is not all about the money. Making sure you are financially stable and ready to make a significant long-term financial commitment should always come first.
To see which metro areas would be most affected by a 1 percentage point increase in interest rates, see the graphic below. For a deeper analysis, visit Zillow Real Estate Research.