Feb 5, 2019

Thinking of waiting to own a home? Want to see if prices decline this summer? Hoping for a market more favorable to buyers? You might want to think again.

2018 started with soaring prices and a frenzied market that saw multiple buyers competing for the same properties. But the year closed with higher mortgage interest rates, less competition, and a shift in the market.  Home prices certainly aren't in free-fall. But experts believe home price appreciation will slow to an increase of 3% to 6% (depending on who you ask) in 2019.

So what does that look like for buyers in Jefferson County, WA?

Home Prices

Home prices have increased steadily in the last seven years. The average price of a home in Jefferson County in 2018 was $400,455. An increase of 3% would put the average 2019 price at $412,469. That means the same house you could buy last year for $400,000 will cost you $12,000 more this year.

Below is a table of average home prices in Jefferson County for the last 15 years. That's an average increase of 3.51% - even taking into account the five years of decreasing home prices during the recession.

Jefferson County Washington Average Sales Price of Homes
Source: Northwest MLS

What if prices increase by the 6.3% predicted by Zillow? Now that $400,000 home will cost you $425,684.

Interest Rates

What will happen with mortgage interest rates? That also depends on who (and when) you ask. Barely two months ago, most experts predicted 2019 would see interest rates of 5.1% to 5.5%. But now those same experts believe rates will instead stay just under 5.0%.

So what's the difference between 4.5%, 5.0%, and 5.5%?

Monthly Mortgage Payment at Various Interest Rates for Different Priced Homes

Let's go back to our $400,000 home purchase. Freddie Mac pegs the average 2018 interest rate at 4.54%.  Our $400,000 home at 4.5% would cost $1,621/month with a 20% down payment. In 2019, the same home could cost as much as $425,000.  At 5.0%, that's a monthly payment of $1,825/month. That's $200/month and more than $53,000 in increased interest charges over the life of the loan.

What if you have a budget of $1,500/month? At 4.5%, that gets you a $375,000 home. At 5.0%, that gets you a $350,000 home.  At 5.5%, that gets you a $325,000 home. And again, as prices increase your buying power gets you less home a year from now than it gets you today.

Lost Opportunity

The other thing you miss by delaying home ownership is another year of missed appreciation. If you purchase a $300,000 home that's increase in value by 5% per year, that's $15,000 you lose the first year you don't own that home.  Delay another year and you've robbed yourself of another $15,750.

If you're paying rent, you're also continuing to pay someone else's mortgage instead of your own. If you pay $1,500/month in rent, that's $18,000/year that you're giving to someone else instead of earning equity for yourself.

Of course, nobody has a crystal ball! The experts have been wrong before. And with our large number of retirees and second home sales, Jefferson County seems to be an insulated market that doesn't necessarily follow national trends. Ultimately, you'll have to decide the best time to buy for you!