"Clear, patient and honest communication."
eli d
Buy Now, Refi Later? The $276 Gamble
For several months, analysts have been telling us that interest rates will drop once inflation starts to come down. Homebuyers in 2022 are planning on buying now (with higher interest rates and often home price reductions) and refinancing later (when rates come back down). I wanted to compare this strategy to some other possibilities for 2023. Specifically I wanted to look at what happens if home prices decrease 5% and rates either go up or down.
Industry experts are predicting rates will drop over the next 12 months and history suggests it should happen quickly. Generally home prices increase as rates drop and (as we've seen this year) home prices can go down when interest rates go up. The opposite is always possible, so I wanted to compare the buy now & refi later strategy to the possibility that home prices go down 5% and rates go up further. By purchasing a home now, the monthly savings was about $400/mo.
I also wanted to include a "Fantasy Land" best case scenario where home prices go down 5% and interest rates drop a little over 1%. I then compared this best case scenario to the Buy Now, Refi Later strategy, and found that the potential savings would be $276/mo. So the $276 Gamble would be anyone who doesn't buy a home in the hopes that home prices will decrease AND rates will decrease.
Industry experts are predicting rates will drop over the next 12 months and history suggests it should happen quickly. Generally home prices increase as rates drop and (as we've seen this year) home prices can go down when interest rates go up. The opposite is always possible, so I wanted to compare the buy now & refi later strategy to the possibility that home prices go down 5% and rates go up further. By purchasing a home now, the monthly savings was about $400/mo.
I also wanted to include a "Fantasy Land" best case scenario where home prices go down 5% and interest rates drop a little over 1%. I then compared this best case scenario to the Buy Now, Refi Later strategy, and found that the potential savings would be $276/mo. So the $276 Gamble would be anyone who doesn't buy a home in the hopes that home prices will decrease AND rates will decrease.