If you’re thinking of buying a home but hesitating, each year you delay could mean a loss in financial benefits over the long term, even in high-cost places like California.
With interest rates and home prices expected to climb in the next year, potential buyers who choose to remain on the sidelines for even a year could lose thousands of dollars in financial benefits over a 30-year time horizon, according to new data.
The Opportunity Cost Report, recently released by Realtor.com, revealed that the estimated wealth an average national buyer would accumulate over a 30-year period totals $217,726. If buyers wait a year, it could cost them as much as $18,672 in lost financial benefits over 30 years. Delaying homeownership for three years could mean a long-term financial penalty of $54,879. The report takes into account the loss of potential mortgage interest rate deductions for homeowners, projected price appreciation, rising rents and higher mortgage rates.
Chris Isaacson, president of the Silicon Valley Association of Realtors, said the report is a financial analysis based on assumptions about rising mortgage rates and changes in home values.
“Lifetime renters face the biggest opportunity costs because they are losing out on the long-term financial benefits of owning a home,” he said. “Homeownership builds wealth over time, but buying a home is a very personal decision. In addition to the financial aspect, there are other major factors that have a significant impact on homeownership, like job security and the personal situation of buyers.”
The report mentions seven California markets – Santa Cruz-Watsonville, Santa Rosa, San Jose-Sunnyvale-Santa Clara, Napa, Salinas, San Diego-Carlsbad and San Luis Obispo-Paso Robles-Arroyo Grande – with long-term gains exceeding $500,000. It notes that while they are relatively expensive markets, the potential long-term wealth is the greatest nationwide and the loss in financial benefits for delaying ownership is substantial, due to price appreciation, escalating rents and higher mortgage rates over a 30-year horizon.
In the San Jose-Sunnyvale-Santa Clara area, the 30-year total financial benefit of owning is $782,144. The penalty of waiting one year to buy is $61,805. The penalty of waiting three years is $191,053.
The Silicon Valley Association of Realtors provided information for this article. For more information, email Rose Meily at [email protected].
