The market is HOT, should I wait to buy until it cools a bit?
The short answer, No. As home prices continue to rise beyond what we think they may be worth, its only natural to think the bubble has to burst at some point. Our tendency is to think we should wait until it does and take advantage of the market then.
Affording a home involves more than the purchase price alone. The interest rate you will pay for that money is equally as important. After all, our payment is what usually dictates what we can afford.
For the past several years interest rates have been low. So low in fact, we have more buyers wanting homes than ever before. The low interest has made homes more affordable, but has also caused homes to increase in value as inventory shrinks due to this large demand.
So, why not wait? If you are looking at a home that is $300,000 today and you are doing a conventional loan (20% down) your payment will be $1,135 (without taxes and insurance). Lets assume the market slides next year by 5%. The home you bought is now worth $285,000, but interest rates are now 5% which would have made your payment $1,224 if you waited to buy. Ultimately costing you $89 more per month by waiting or $32,040 over the life of the loan.