Cost vs. Value: A Home Buyer’s Guide

Judy Boyle, Realtor®, RE/MAX

We all know that owning a home is an important component in ensuring financial freedom. It is, after all, the American Dream. But how do we know when it is the right time to buy?

As your local real estate expert (and a real estate junkie myself), I spend countless hours reading up on the local trends, analyzing the data presented by the real estate experts (Fannie Mae, Freddie Mac, Mortgage Bankers Association, National Association of Realtors, and Core Logic to name a few), and (almost more importantly) looking at the predictions. Four times a year I consolidate my findings and create my Home Buyer and Seller Guides which are complimentary to you for the asking.

In this article, I would like to provide a sampling of my findings for the fall of 2015 and what’s coming down the road for the next 12 months.

When I think of home affordability, I think of “Cost vs. Value.” What this means is the price of a home is not the only factor when computing your monthly payments. We all want to know we are getting the most bang for our buck. The best way to do this is to know where home prices and mortgage rates are today and where they are headed. This is where I rely on my trusted advisors cited above.

For example, all the experts agree that Massachusetts home prices could increase 5.6 percent by this time next year. That means that a house that is worth $400,000 today could be worth $422,400 by this time next year.

The experts further predict that mortgage rates are expected to climb a full percentage point on average to 5 percent by the fourth quarter 2016. Okay, so what does this all mean?

Based on the above predictions, if you were to buy a house today for $400,000 your payment would be roughly $1,814 (principal and interest with a 5 percent down payment). That same house next October could potentially “cost” you $2,160 per month.

To give you a couple more examples, a $250,000 house would cost you $1,134 per month today. That payment would jump $212 to $1,346 per month by October 2016.

And finally, a $600,000 home will cost you $2,721 today, yet, if you wait 12 months, it could cost you $3,231. That $500 per month could buy you a new car.

So if you are still asking yourself if it’s a good time to buy or sell, don’t just listen to me. Take the advice of Doug Duncan, senior vice president and chief economist for Fannie Mae, who said it best: “The rule for when it is a good time to buy is always the same: given your household budget and where current interest rates are, if it makes good sense to refinance or take out a home loan today, then today is the day to do it.”

Boyle lives in Northborough where she is also a chapter leader of the Neighbor Brigade, a local nonprofit that assists families in times of crisis. She has been a real estate agent since 2003 and consistently wins awards and accolades for excellence in customer service and sales volume.

Her mission is to empower her clients to make smarter decisions through data-driven insights and local market knowledge. She invites you to follow her on Facebook at www.facebook.com/judyboylecares, call or email her for the Fall 2015 Home Buyer and/or Seller Guides, or just to talk real estate.