Should I Buy a House Now or Wait?
That is a tough question. The answer is not so straightforward and depends on your specific situation. There are some general guidelines to follow when deciding whether to buy your dream house now or wait for the future.
Just remember that buying a house is one of the most important decisions you will ever make.
When it comes to buying a home, there are many factors that need to be considered such as location, size, and price. You also have to think about what your future goals and ambitions might be and plan for them ahead of time in order to avoid any regrets in the future.
The Current Housing Market
In recent years housing prices have skyrocketed because of high demand and low inventory. With the addition of the COVID-19 virus, housing prices continue to fluctuate considerably.
There is a Staggering Imbalance of Supply and Demand.
There are more people interested in purchasing homes than there are people interested in selling their homes. Dwindling housing supplies have stimulated intense competition marked by bidding wars and all-cash auctions.
Now is a great time to acquire a property, but be prepared for a fight if you are looking to purchase a house in any major city.
Every Local Market is Different
The suburbs were particularly hot during COVID-19 for homebuyers looking to escape from the cities and have more room to work. Conversely, the condo market and city markets overall softened in some cases.
What you should keep in mind is that each local market is unique and the experiences of your friends with the housing market might not match your own.
Investor Activity Overcrowds the Market, Further Shrinking Housing Inventory
Low mortgage rates and a desire for comfortable work-from-home lives have fuelled the buybacks frenzy. In addition, large investors of Blackstone and Invitation Homes purchased some of America’s most expensive homes. OpenDoor, Zillow, and Redfin pay for their thousands of home loans at a cost of up to 20 times what they were selling. In other cases, it’s a company that grabs up home at below-market prices for cash before finally reselling it at the earliest possible hour. Wall Street purchases houses in entire communities to become wealthy.
Home Prices
Home prices are on the rise! According to a recent report, home prices have reached an all-time high. But with bidding wars and down payments, is it worth it? Let’s find out:
What Does This Mean for You?
Bidding wars and down payments can be expensive and time-consuming.
It might not seem like much at first glance but if you consider that bidding wars require buyers to put in offers higher than they would normally pay just so that another buyer won’t get their hands on the house, then bidding war costs may actually go up significantly.
Many buyers have been forced into bidding wars because properties are being sold so quickly before they even have a chance to find out what they are actually worth.
If you are thinking about buying a house, do not let the housing market fool you. You may fall into a bidding war and end up paying more than you can afford. Be on the lookout for overpriced homes selling on the spot because that is prime time to negotiate. Make sure to consider all your options before making any decisions.
Home Prices Continue to Rise
For June the median house value was $363,300 up 13.1% relative to June 2020. In July economists said they expect inflation to slow down over the next several months. The data provider said it also expects price growth will drop. CoreLogic Home Price Insights forecasts that the average household price will rise 3.2% from June 2021 to June 2022.
Mortgage Rates
When you are looking to buy your first home, there are many housing programs that can help you achieve this goal sooner. If you have less than perfect credit or low income one of these programs may be the solution for you.
When thinking about financing your home purchase consider your required down payment. A single percentage point increases your monthly payment significantly. You should always shop around for a lower mortgage rate.
There are two main types of mortgage rates available to someone buying their first house – fixed and adjustable-rate mortgages (ARM). Both options offer lower interest rates than most mortgage loans; however, they do vary in some important ways. Fixed-Rate Mortgage Consider the fixed-rate mortgage (FRM). With this type of loan, your interest rate remains constant throughout the life of your loan. The bulk of risks involved with the FRM is on the front end when borrowers normally pay points in return for a lower interest rate.
Borrowers who plan to own their home for at least five years should consider the FRM because the average mortgage payment over this time period will be less than with an ARM and monthly payments do not increase or decrease throughout this timeframe. Adjustable-Rate Mortgage If you only expect to stay in your house for a short time, such as three to five years, then it may be wise to consider an ARM instead of an FRM. The ARM offers low rates initially but can increase later on depending on certain conditions that could arise. With the adjustable-rate mortgage (ARM), borrowers pay points up front in exchange for a low-interest rate; however, unlike fixed mortgages, this rate is variable and adjusted by the lender every time the mortgage rate is recast, usually at a time period of one year (the interest rate may escalate more frequently). Mortgage rates and mortgage payment amounts will vary depending on many specific criteria, including fixed versus adjustable mortgage rates and credit scores.
However, specific monthly payment and mortgage rates depend on these factors:
- Your Credit
- Your Debt
- Down Payment
- Mortgage Amount
- Your Monthly Income
With the FRM you know what your exact mortgage payments will be for the life of the loan which can help buyers with budgeting their money.
Mortgage Rates are Historically Low
In today’s market, experts have trouble predicting how things will evolve. Homebuyers must wait for prices to plunge but mortgage rates have fallen to record lows. Your monthly mortgage payment might still be more if you bought today or wait on the market to cool off but it’s impossible to predict what’s going to happen next in the housing market.
Lender Shopping Remains Critical
Review your credit score and dispute any issues and learn your credit score. Prepare information about your income, debts, employer employment, and funds. A mortgage preapproval is an offer from a lender to loan you a certain amount in specific terms. It isn’t a guaranteed loan approval but shows real estate agents and sellers you are serious buyers. Combining that budget with your house budget knowing what amount you are qualifying to borrow is crucial to know how much house you can afford.
Your Credit Score
Your Credit Score is a number between 300 and 850 that is given to credit-worthy consumers as a way of determining their creditworthiness. A score of less than 620 or so might be an obstacle in your purchasing power because banks will charge you more for credit since your creditworthiness is low.
Other debts such as credit cards, loans, and medical bills can also drag down one’s credit score even if they are regularly paid on time and do not exceed 30 percent of the credit limit.
When it comes to buying a house, having enough money saved up becomes critical to whether you’ll be able to afford monthly payments out of pocket, should other unexpected costs arise.
To buy a house with a low interest rate your credit score will need to be at least 640. You will need a credit score of 720 or more if you want the lowest interest rates in the market.
Consumers should attempt to pay credit cards bills on time each month and not go over 30 percent credit utilization. Staying out of debt and doing this may help them get their credit score closer to 800 so they won’t be stuck with high interest rates.
Make Sure You Understand the Home Buying Process
Buying your dream home in a hot market with rising prices is more easily navigated with a professional real estate agent by your side.
Rising home prices put home buyers, especially first-time homebuyers, in a difficult position. It’s a seller’s market, we have seen that over the past year. With high prices expected to continue into next year, the real estate market and the American dream of a new home should be founded with a clear understanding of the homebuying process.
In Conclusion
The decision to buy a house is one of the biggest decisions you’ll make in your lifetime. It’s something that will affect not only your financial life but also every other aspect of it as well. So what do you need to know about buying now or waiting? You can call us today for an expert opinion on whether you should buy now or wait until prices drop.