AgentMarkets & Economy

Delaying homeownership could be costly decision for potential buyers

Buyers risk losing thousands of dollars by not taking advantage of today’s interest rates and home prices, says realtor.com

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Potential homebuyers who are renting while they put off buying a home could lose thousands of dollars by not taking advantage of current interest rates and home prices, according to a recent realtor.com report.

The online real estate services provider’s Opportunity Cost Report analyzed the 382 largest markets in the country using data on current median existing-home prices, rents, local mortgage rates and estimates of property tax and insurance rates, and factored in maintenance costs, costs of selling, and forecasts for mortgage rates, home prices and rents over a 30-year time horizon.

The report examined a wide range of factors, including the long-term financial impact of owning versus renting a home, the likely monetary gain renters forgo in waiting to buy and the financial benefits of homeownership by market.

With home price appreciation dropping, escalating rents and higher mortgage rates on the horizon, potential buyers who delay homeownership may face long-term financial penalties, the report concluded.

“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 homebuyers — especially first-timers — standing on the sidelines and missing out on potentially material financial gains.”

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According to the report, the estimated wealth an average buyer would accumulate over a 30-year period based on today’s dollars totals $217,726. Although some markets are more buyer-friendly than others, national data shows homeowners see significant financial benefits as compared to lifetime renters.

It’s important to remember that a home purchase decision is deeply personal." - Jonathan Smoke, chief economist for realtor.com

In 88 percent of MSAs, buying a home produces a financial benefit of at least $100,000 over 30 years.

“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,” Smoke said.

Email Amy Swinderman.