TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/539233
50 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS The LaTesT With estimated 30-year financial gains above $500,000, and oppor- tunity costs of waiting three years as high as $200,000, ten markets are much more appealing to own- ers, the Realtors report. California and other Western states metros are expensive markets with strong housing demand and limited sup- ply. The long-term wealth potential and financial penalty for delaying homeownership in these areas are the highest nationwide. This is mostly due to price appreciation, escalating rents, and higher mort- gage rates on the horizon. "This analysis looks solely at the financial reasons to buy a home, based on assumptions about rising mortgage rates and changes in home values," Smoke said. "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 addi- tion to financial benefits, because they too can have a significant impact on ownership." Waiting to Buy a Home could cost consumers thousands Due to rising interest rates and home prices, waiting to buy could cost consumers in the end. t he financial costs of delaying or forgoing a home purchase in today's unexpected market have become very high, according to the inaugural Opportunity Cost Report released by Realtor.com. With interest rates and home prices expected to rise within the next year, consumers could end costing themselves more by putting off buying a home. The report reviewed the 382 largest markets in the U.S. using data on current median existing home prices, rents, local mortgage rates, and estimates of property tax, and insurance rates. It also factored in maintenance costs, costs of selling, forecasts for mort- gage rates, home prices, and rents over a 30-year time period. "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," said Jonathan Smoke, chief economist for Realtor.com. "The problem is inventory is low, which has many would-be home buyers–especially first timers—standing on the side- lines and missing out on potentially material financial gains." The estimated wealth an average buyer would accrue over a 30-year period totals $217,726, the report noted. The penalty of waiting one year to buy is $18,672, while the penalty of waiting three years to buy is $54,879. National data shows that homeowners see sizable finan- cial benefits compared to lifetime renters, despite some markets being more buyer-friendly than others. The 30-Year financial benefit of owning ranges from more than $1 million in Santa Cruz, California to $200,000 nationally. In 88 percent of metro areas, buying a home pro- duces a financial benefit of at least $100,000 over 30 years. "The problem is inventory is low, which has many would-be home buyers– especially first timers— standing on the sidelines and missing out on potentially material financial gains." —Jonathan Smoke, Chief Economist, Realtor.com