Home prices continued to climb last quarter to levels not seen since late 2006. Throughout all of this, however, home sales are remaining level and affordability hasn’t suffered too much - thanks to lower mortgage rates. According to TheMortgageReports.com, “Last quarter, more than six in 10 U.S. homes were ‘affordable’ to households earning the national median income, assuming that household used a 30-year conventional mortgage to finance the home, made a modest down payment on the property, and carried good credit scores.”
However, some sources are warning that homes may become too expensive for many first time home buyers as time goes on. Due to unexpected election results, mortgage rates are rising to new 7-month highs, and economists fear they may continue to rise. “The good news is, though, that home price increases could finally slow,” continues TheMortgageReports.com “Home shoppers may once again find ‘deals’ in the 2017 market.”
If the mortgage trend reverses, rising payments could mean fewer multiple offer situations and over-market price offers. The everyday home buyer will be able to get better prices on the same homes, thus keeping things affordable despite rising rates, at least for a while. This will create a ‘sweet spot’ of opportunity for home buyers to score a reasonably priced home, along with relatively low mortgage rates. As rates rise, however, these homes will become less and less of a deal.
So why wait? Here are some of the best reasons why you should buy NOW.
1. Historically Low Mortgage Rates Could Disappear Soon. As discussed earlier, this is probably the number one reason to buy a home sooner than later. Currently, interest rates on home loans are very low compared to where they’ve been historically. If you don’t know much about interest rates, basically, the lower they are, the less a borrower has to pay to the bank in interest. This means lower monthly mortgage payments, and more money saved overall. That period we mentioned earlier where interest rates remain low, but home prices level off, is the time to strike. This is arguably the best time to buy in several years, and it may not last long.
2. Prices are leveling off, but still rising. Make no mistake, home prices are still climbing upward, even if they are doing so at a slower rate. This is an incentive to buy now if you’re able because prices will likely be lower now than it will be a few months from now. As people continue to move to the area (and they will - because our job market is ever-expanding), home prices will appreciate. If you can buy in an area that is becoming more popular BEFORE prices go up, then you will get the best return on your investment.
3. Rents are rising faster than ever. Rents are going up all over the nation, especially in the most desirable neighborhoods and cities. Per the 2015 Rent.com Rental Market Report, rental inventory is near a 20-year low. They report that 88% of property managers raised their rent in the last 12 months by an average of 8%, and that number likely went up in what has passed of 2016. This could be because many millennials are opting to rent rather than own, but many people don’t realize that it could be much more affordable in the long run to own. SmartAsset.com has a handy Rent vs. Buy calculator that is built to help those who are on the fence about buying.
If you’re an investor, you should already know to strike while the iron is hot. Low mortgage rates and a saturated rental market mean more cash flow to you in the long run. It’s an incredibly opportune time to add to your collection of rental properties, or to flip!
4: Tax laws favor homeowners. Many first-time home buyers don’t know this, but buying a home (as well as renting a property) means you will be getting several tax breaks. SmartAssets.com is also has a great article that details what homeowners can deduct at tax time. Basically, if your home loan is under a million dollars you can deduct all the monthly interest you’re paying for that loan, you can also deduct some of your home-related expenses and some of your property taxes. If you’re renting, you can’t get these tax breaks.
If you’re starting to think it might be a more financially sound decision to buy a home for the first time, looking to invest, or if you’re just looking to move up, the next several months are going to be prime time to buy. Buying before prices and mortgage rates go up can save (or make!) you a lot of money in the long run, and contribute to your financial stability in a way that stocks, bonds, and saving can’t match.