Is Now a Good Time To Buy A Home?
Home prices have been trending upwards in the United States in recent years. Find out if now is a good time to buy.
How much does a home cost?
The average price for a home in the united states went from just over $175,000 in February 2015 all the way up to about $203,000 in May of 2018. Just in the last year the price of the average home has increased between 6% and 7% over the last year. That’s more than double the pace of the national average rate of inflation, which was 2.7%. And with demand high and inventory low, the prices will continue to rise.
Increasing mortgage rates won’t help
The 30-year fixed mortgage rate has gone up a little less than .5% in the last year, but the Fed is planning on raising the short-term interest rates again, which could potentially cause mortgage rates to rise as well.
Home affordability rates are going down
Homes in the Midwest continue to be much more affordable for the average family than homes in the western states. But as home prices and mortgage rates increase, home affordability goes down. And that’s exactly what the current trends are indicating. As this trend continues, many home buyers will delay their decision to buy or be forced out of the market altogether.
So should I buy a home now?
The answer is, “It depends.”
Currently renting? If you’re currently renting and predict your income will stay the same, or grow less than 7%, then the answer is, “Yes, buy now.” If you wait, the odds are that the cost of your dream home will become less affordable over the next couple of years. Don’t forget to factor in the extra costs associated with owning a home.
Are you up-sizing? If you’re looking to buy a more expensive home than the one you currently own, then the answer is, “Buy now.” The increase in cost of your residential upgrade will add up to more dollars than the increase in value of your existing home. So you are losing money as prices and mortgage rates continue to rise.
Downsizing? A 7% increase in the value of your current $400,000 home is $28,000. A 7% increase in your next home valued at $200,000 is $14,000. So, if you like money, the answer is, “Wait to buy, and ride out the rising home prices if you can.” Of course this assumes that you will not need a mortgage on your next home because rates are going up.