Published January 8, 2025
Why Buying a Home in Today's Market Still Makes Sense
With mortgage rates higher than in recent years, many buyers and sellers are hesitant to take action. The jump from 3% to 7% interest rates in 2022 increased financing costs, making homeownership seem less appealing. But when you dive into the details, data shows that buying a home remains a strong investment, even during periods of higher rates.
Breaking Down the Numbers
Buying During "The Worst" Time
In January 2022, mortgage rates were 3.22%. By October, rates peaked at 7.08%.
A $698,000 median-priced home purchased at 7.08% would mean a monthly payment of $4,255, compared to renting an equivalent home at $3,250—a $1,005 difference favoring renting at the time.
Home Price and Rent Growth
Over two years, median home prices rose by 8.12%, adding over $56,000 in equity.
Rents increased by 15%+, raising equivalent rent to $3,738. The cost gap narrowed to just $517 per month as fixed mortgage payments remained stable.
The Power of Refinancing
By refinancing when rates dropped to 6.08% in September 2024, monthly payments fell to $3,891—only $154 more than renting.
With rents likely to continue rising, the cost of homeownership could soon be lower than renting.
Building Wealth Through Equity
Renters gained no equity, while homeowners saw $56,000+ in equity growth.
Cash-on-cash return for homeowners over two years was approximately 34%, factoring in the down payment and additional housing costs.
Why Waiting May Cost You This example reflects a "worst-case" scenario, using the highest interest rates of 2022. Many homeowners experienced greater appreciation and benefited from earlier refinancing opportunities. Waiting for significantly lower rates or a market shift could mean losing out on equity gains, wealth-building, and the lifestyle benefits of homeownership.
Is Buying Right for Everyone? Not necessarily. Personal circumstances and financial goals play a crucial role. However, those waiting for "perfect" conditions may find themselves losing money, time, and the opportunity to enjoy the benefits of owning or upgrading their home.
If you’re considering buying or moving, let’s explore your options and help you make an informed decision.
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