Uncertainty in the Market

There are would-be homebuyers who are currently questioning their decision to buy a home in today's volatile marketplace.  The nervousness about the Coronavirus has some people feeling that waiting may be a prudent thing to do.

It certainly may feel natural to question it but there are some things you might want to consider.  Mortgage interest rates are at a fifty-year low.  Locking in a 30-year mortgage at these incredibly low rates may never be available again.

The same market force that is driving down mortgage rates, also drives down savings rates.  Even if it was in a "high yield" savings account, it would probably be earning less than one percent.  If you have your down payment ready to be used, it is not going to earn much.

Inventory is still low across most of the nation and homes are expected to appreciate three to five percent this year.  Homeowners enjoy appreciation on the value of the home and not just the down payment they have invested in it. 

The spring usually brings out the buyers who have been dormant during the winter which causes more competition among the best homes but due to the stay at home orders, sales were down.  It is expected that the summer market this year will be the spring market..  You may be fortunate enough to not only find the home you want; in the area you want but not have to getting in a bidding war for it.

Compare three places to put your $30,000 down payment while you wait for two years for things to calm down.  The objective is to decide where you will be best off financially at the end of the two years. 

If you could invest in a certificate of deposit earning 2%, in two years, it would be worth $31,212.  If you put it in the stock market and it went up 3%, it would be worth $31,827 if you picked the right stocks.

If you use the down payment on a $300,000 home that appreciates at 3% a year, the $30,000 would grow to $57,973 in equity in the same two-year period.  A home is leveraged investment because your down payment allows you to earn on the value of the home going up because you are using "other people's money" to finance it when you get a mortgage.

Plug your own down payment and price home you are waiting to buy to see what Your Best Investment would be.