Buy now or buy later — that is the question US homebuyers are currently struggling with. But with US home prices expected to rise sharply next year, homebuyers with a downpayment in hand might want to take the plunge and buy now before the increase.
Waiting could cost some homebuyers as much as an additional $600 per month to match rising prices, according to a report released today by the listing site Zillow.
Nationally, the median home will be priced $6,275 higher than it is currently, says Zillow’s home value forecast. That adds up to $1,260 over the next year that homebuyers will need to save to help cover their downpayment, or an additional $105 a month.
But the amount homebuyers will need to save to account for rising prices can vary greatly depending on the market they’re buying in.
In San Jose, CA, one of the country’s hottest markets, home prices are forecasted to rise nearly $36,000 to $1.8 million, which will require a downpayment that is $7,188 higher than what’s needed today. That breaks down to just about $600 a month that homebuyers would need to tuck away to match price appreciation in San Jose.
The markets where homebuyers will have to save the most to match rapid price appreciation are for the most part located on the West Coast: Seattle, WA ($394 per month), San Diego, CA ($267 per month), and Portland, OR ($227 per month).
Of the cities studied by Zillow for the report, Boston, MA was the only East Coast city where homebuyers would have to save over $200 per month for a downpayment in order to buy next year.
Meantime, homebuyers in cooler markets like Pittsburgh, PA would only have to stash an additional $60 per month to match rising home prices in their market.
But buying now before prices increase is not without its risks. For example, sellers may not feel an offer is as competitive with a low downpayment.
“However, a renter who saves for another year to reach a larger down payment may find that the home they love today is outside their budget a year from now. For those considering buying in the next year, getting into the market today may make more financial sense than they think,” says Zillow Chief Economist Dr. Svenja Gudell in the report.
Click here to read the entire report.