One thing that we are starting to hear from our buyers is that they’ve decided to put their home search on hold. Maybe they’ve been searching for a while and are getting burnt out. Maybe they just started their home search but are intimidated by the market. We know that it can be tough to persevere if you’ve been met with some of the challenges that this current market presents. However, we’re here today to help remind you of the reasons why persevering is so worth it!
Start Building Equity Now
While the home buying process may seem overwhelming now, keep in mind that the long-term benefits outweigh any temporary frustration. By purchasing a home, you are making an investment that will contribute to your overall net worth. In fact, Liberty Tree Economics reports that 93% of Americans believe that buying a home is definitely or probably better than investing in stocks. If you are currently renting, start thinking about the money that you are spending on rent vs what you could be spending on a mortgage. As stated in a report by Urban Institute, you can think of these mortgage payments as deposits into a savings account. As you put in more money, it will maintain its value and even grow over time. Compare this to rent where your money is going straight into the hands (and likely right out of them) of your landlord. Not only will you not get that money back, but you miss out on capitalizing on the appreciation.
These Rates Won’t Be Here Next Year
Okay, so you’ve probably heard by now that the interest rates are a record low. We may sound like a broken record, but that’s just because it’s true! According to an article posted by Keeping Current Matters (KCM), interest rates are projected to rise to 3.2% later this year and 3.7% in 2022.
What exactly does that mean for you? With lower interest rates, your money can go further. Rather than your monthly payments going largely towards interest, you’re able to put more of your money towards your home. For example, let's say your monthly budget is $1,500 a month for a mortgage. To back you into a pre-approval amount, your lender will take into account what you can afford based on the price of the home itself as well as other factors such as principal in interest. If your interest goes up, the only way to stay at that same monthly amount is to drop the price of the home. Meaning, you’ll be spending the same amount but will have fewer options available. If you’re banking on the home prices dropping in order to make up the difference...be sure to keep reading (spoiler alert: they won’t!).
Home Prices Aren’t Going Down
If you’re waiting to see home prices drop before you purchase...you’ll be waiting a while. According to KCM, experts expect home prices to increase by 8.66% in 2021. Due to the extreme inventory shortage and high demand, appreciation is at an all-time high and those prices are going to keep rising. In the coming years, the appreciation rate may drop a bit, but it will still be an increase! KCM predicts appreciation rates hovering between 3.5-4.5% through 2025.
So, if you’re waiting for that house you saw to drop its price in a few years, it’s probably best to take the leap now! You’ll end up getting the home for less than it will be down the road, a lower interest rate, and a chance to build equity in the home.
Bottom Line
The current market conditions can be frustrating if you’ve been looking for a home for some time now. As much as you may want to throw in the towel, it’s important to stay positive and keep going! The benefits greatly outweigh the challenges you may be facing at the time. Trust us! We know that the perfect house for you is right around the corner and once you find it, you’ll be so glad that you kept going. If you have any questions about the opportunities for you as a buyer in this current market, reach out to us. We’d love to talk!