You may be interested in buying a home, but is this the best time to buy? That decision will depend on your individual situation as well as your finances, but here are five good reasons to buy now, rather than waiting to see how things “shake out” later in 2017.
1. Interest Rates are Rising
After years of historic lows, interest rates are edging up. This started late last year when the Federal Reserve increased its benchmark interest rate by a quarter point in December, and again in March. Experts are expecting three more upward adjustments during 2017. (Buyers should remember this is a projection, not a promise.)
The fact remains that interest rates were lower a year ago, and that the trend of increasing interest rates is expected to continue. In fact, current homeowners with an adjustable rate mortgage may want to consider securing a fixed rate loan before rates increase further.
If you currently live, and plan to remain, in one of the larger metropolitan areas where it’s cheaper to own than to rent, you should consider buying now to save money over the long term.
Just make sure you are considering all the expenses associated with home ownership before comparing monthly rent payments to the costs of owning a home (mortgage interest expense, taxes, repairs, closing costs, etc.). Divide the cost of these expenses over the total number of months you plan to stay in a home to have an accurate cost comparison.
3. Home Prices are Increasing
Nationally, home prices have outpaced rent costs in recent months and are now higher than they were prior to the housing crash of 2007. If this trend continues, it will become more expensive to buy than to rent, even in non-metropolitan areas. So, if you plan to buy, now is probably better than later.
Projections by Fannie Mae, Freddie Mac, the National Association of REALTORS®, Kiplinger, and the Mortgage Bankers Association all point towards rising home prices over the course of 2017. Averaging these experts’ predictions, the increase will be 4.9 percent (the lowest projection is 3.9 percent, and the highest at 5.2 percent).
4. Inventory is Still Shrinking
Inventory, especially for low- and median-priced homes, is expected to continue to decline in 2017. Those individuals who were hesitant to buy during the aftermath of the housing bust are now jumping into the market.
Many of these buyers are millennials (people born after 1980). They represent a huge influx of buyers who were previously sitting on the sidelines, for a variety of reasons, and are often looking at moderately-priced homes, which is also the segment of the market with the smallest inventory.
5. Supply and Demand
The basic economic principals of supply and demand dictate that when fewer numbers of a desired commodity (like median-priced homes) are available, buyers will compete over ownership, driving up prices. A seller’s market in this segment won’t make it easy for buyers to negotiate the best deals.
On the flip side, if more potential buyers are edged out by increasing interest rates and a continued rise in prices, those who are still in the market to buy will, eventually, have a bit more leverage to negotiate with sellers.