Agents and developers selling homes in the US have a powerful message for purchaser to buy now – as those who wait 30 years before purchasing a property can miss out of gains of up to $1million, according to new data.
The national average benefit of buying over renting stands at $217,726, while the benefit of buying in Santa Cruz, California, is $1million, figures from the realtor.com website show.
In many of the highest-priced regions, most of which are in California, a delay in buying even for just a year can set the buyer back up to $65,000.
The inaugural Opportunity Cost Report examines the financial penalties of delaying or forgoing a home purchase in today’s market. It various factors, including the long-term financial impact of owning versus renting a home, the likely monetary gain renters forego in waiting to buy and the financial benefits of homeownership by market.
Jonathan Smoke, Chief Economist for realtor.com, says, “Current market conditions give buyers the opportunity to build substantial wealth in the long-term, compared with renters and later buyers, in advance of the projected increase in mortgage rates and continuing price appreciation.
“The problem is inventory is low, which has many would-be home buyers – especially first timers – standing on the sidelines and missing out on potentially material financial gains.”
Although some markets are more buyer-friendly than others, national data shows homeowners see significant financial benefits as compared to lifetime renters. In 88% of MSAs, buying a home produces a financial benefit of at least $100,000 over 30 years.
Ten markets provide estimated 30-year financial gains above $500,000, and opportunity costs of waiting three years as high as $200,000. These MSAs, in California and other Western states, are relatively expensive markets with strong housing demand and limited supply.
The potential long-term wealth in these areas is the greatest nationwide, and likewise, the long-term financial penalty for delaying ownership is substantial, due to price appreciation, escalating rents, and higher mortgage rates on the horizon.