The ACTUAL Cost of Waiting

Despite purchasing at the highest rates in more than 20 years, Buyers who purchased a home in November 2022 built more than $150,000 additional wealth than those who waited until August 2024... AND they got to enjoy their new home for nearly 2 more years.

Since interest rates started increasing in early 2022 rising from 3.1% to 5.8% by Summer and peaking at 7.08% in November, many buyers & sellers were choosing to sit on the sidelines and wait until "conditions improved" and interest rates were lower. However, real estate & mortgage professional and economists were consistently forecasting that waiting would not pay off, and the best course of action for those who needed or wanted to move or buy their first home would be to "buy at today's lower prices, and refinance when rates moderate to lock in long term lower ownership costs."

With a couple of years in the rearview mirror on this advice we can look at the data for actual answers... to see who's approach actually paid off:

November 2022 Buyer

Let's look at the near 'worst case' situation with a buyer purchasing when rates hit 7.08% (almost 4%) higher than they started the year. If the buyer purchased the median home in King County they paid $759,000 and with a 20% down payment on a $607,200 mortgage with a monthly payment of $4,072. Certainly, this was a higher monthly payment than months before, so it took some courage to take action. 

August 2024 Buyer

If the same buyer waited until August 2024 to purchase, they would have paid $867,500 for the median home - more than 14% more in about 20 months. To make this happen, they'd need $21,700 more for their 20% down payment which would have required saving about $1,000 extra each month to prepare for the purchase. In the end they'd have a mortgage of $694,000 at 6.35% with a monthly payment of $4,318... which is $246 a month more despite the rate almost 0.75% lower!

Wealth Building

When we look at the big picture, the November 2022 buyers have $118,867 more equity/wealth than most recent buyers, and even if they keep their mortgage and don't refinance their next 5 year costs of ownership will be about $15,000 lower due to their lower mortgage payment. This pushed the 'acting early' benefit to more than $133,000!

Power of Refinancing

But wait, there's more... if the November buyer chooses to refinance at today's lower rates (which many are doing right now), they could drop their payment to $3,731 which would save them $359/month. This amplifies the wealth gains over the next 5 years of ownership adding another $21,521 to bring the total additional wealth created to over $155,000.

It's Not All About The Money

Aside from the massive economic returns, the November 2022 buyer likely enjoyed a home the loved for 20 more months and created deeper connections in their new community in this time as well.

What's Next?

If you, or a friend, have waited hoping for rates to drop or prices to decline, we can't take you back and capture these lost gains. However, we can say with confidence many of the conditions of the past 20 months will likely continue over the next 20 months... mortgage rate volatility which overall trend lower and more prices which continue to rise at a moderate pace... so the likelihood you'll experience similar gains by purchasing in 2024/25 rather than waiting until 2026-28 is strong.