Why Now Is the Best Time to Buy a House
If you are thinking about buying a house, you might be wondering if now is a good time to do so. After all, the housing market has been through a lot of ups and downs in the past year, with the coronavirus pandemic, low mortgage rates, high demand, and limited supply driving prices up and down. You might be tempted to wait for a better opportunity, hoping that prices will drop or rates will fall. But the truth is, there is no perfect time to buy a house, and waiting could cost you more in the long run. Here are some reasons why now is the best time to buy a house, and how you can take advantage of the current market conditions.
Mortgage rates are still low, but not for long.
One of the main factors that affect the affordability of buying a house is the mortgage rate, which is the interest rate that lenders charge you for borrowing money to buy a house. The lower the rate, the less you pay in interest over the life of the loan, and the lower your monthly payment. Mortgage rates have been historically low for the past few years, reaching a record low of 2.65% in January 20211. However, since then, they have been steadily rising, reaching 3.88% in October 20212, the highest level since 19993. This means that if you wait to buy a house, you could end up paying a lot more in interest, and have a higher monthly payment, than if you buy now.
The reason why mortgage rates are rising is because the Federal Reserve, the central bank of the United States, is trying to control inflation, which is the general increase in the prices of goods and services over time. Inflation has been rising faster than expected in 2021, reaching 5.4% in September 20214, the highest level since 20085. To combat inflation, the Fed has been reducing its bond-buying program, which is a way of injecting money into the economy and keeping interest rates low. The Fed has also signaled that it will start raising its benchmark interest rate, which influences mortgage rates, in 20226. This means that mortgage rates are likely to continue to increase in the near future, making borrowing more expensive for home buyers.
Therefore, if you are planning to buy a house, you should act sooner rather than later, and lock in a low mortgage rate while you still can. According to a report by Bankrate, a 1 percentage point increase in the mortgage rate could increase the monthly payment on a $300,000 loan by $177, and the total interest paid over 30 years by $63,7207. That’s a lot of money that you could save by buying now.
Home prices are stabilizing, but not falling.
Another factor that affects the affordability of buying a house is the home price, which is the amount of money that sellers ask for their properties. Home prices have been rising rapidly in the past year, as the demand for housing outstripped the supply. According to the National Association of Realtors, the median existing-home price for all housing types in September 2021 was $352,800, up 13.3% from September 20208. This means that the average home buyer had to pay $41,600 more for a house than a year ago.
However, there are signs that the home price growth is slowing down, as the market is becoming more balanced between buyers and sellers. According to the Zillow Home Value Index, the annual home value appreciation in September 2021 was 16.7%, down from 17.7% in August 20219. This means that home prices are still rising, but at a slower pace than before. Moreover, according to the Redfin Homebuyer Demand Index, the number of home buyers making offers in September 2021 was down 18.9% from September 2020, and the number of homes for sale was up 1.4%. This means that there is less competition among buyers, and more choices for sellers, than a year ago.
Therefore, if you are hoping to buy a house at a lower price, you might be disappointed, as home prices are unlikely to fall significantly in the near future. Instead, you should focus on finding a house that meets your needs and budget, and negotiate the best deal possible with the seller. According to a report by Knock, a real estate company, more than 30 U.S. metro areas will favor buyers by the end of the year, meaning that buyers will have more bargaining power than sellers. Some of these areas include Atlanta, Charlotte, Dallas, and Phoenix, where home prices are still affordable and inventory is increasing.
Buying a house is a long-term investment.
The final reason why now is the best time to buy a house is that buying a house is not just a financial decision, but also a lifestyle choice. When you buy a house, you are not only acquiring an asset, but also a place to call home, where you can live, work, play, and grow. Buying a house gives you stability, security, privacy, and freedom, as well as the opportunity to customize your space to your liking. Buying a house also allows you to build equity, which is the difference between the value of your house and the amount you owe on your mortgage. Equity can increase over time as you pay down your mortgage and as your home value appreciates. Equity can be used as a source of wealth, as you can tap into it to fund other goals, such as education, retirement, or home improvement.
Of course, buying a house also comes with costs and responsibilities, such as maintenance, repairs, taxes, insurance, and fees. Buying a house also involves risk, as the housing market can fluctuate, and your home value can go up or down. Therefore, buying a house is not a decision to be taken lightly, and you should do your homework and prepare yourself financially and emotionally before you take the plunge. However, if you are ready to buy a house, you should not let the market conditions deter you, as they are only temporary and can change quickly. Instead, you should focus on the long-term benefits of homeownership, and how buying a house can improve your quality of life and help you achieve your dreams.