Buying a home is regarded as the pinnacle of American achievements, and for good reason: it simultaneously suggests an inherent degree of success and a wise investment opportunity. It’s worth noting, however, that we are at a point in time where the proverbial clock on the American dream is ticking. Only slightly, of course, but it’s ticking nonetheless. The current housing cycle is one that suggests the sooner you consider buying a home, the better. That said, there are three predominant factors working against prospective buyers, and the longer they wait, the more difficult and more expensive it may be to buy their dream home.
With the state of the current housing market being what it is, buying a home may not be as easy as it was just five short years ago when inventory was readily available and prices were significantly lower than they are today. However, I can assure you now is a great time for buying a home if it’s something you intend to do in the near future. While it may require a little due diligence and patience on your end, the sooner you commit to buying a home, the better. And for what it’s worth, some first time homebuyer tips can go a long way in making your dream a reality.
Why? As I already alluded to, there are three fundamental indicators projected to make buying a home more difficult as the year goes on. And instead of taking you through an extensive first time homebuyer 101 course, let me just break it down for you as follows.
1. Interest Rates Are Only Going To Rise
Interest rates have already risen and the Federal Reserve has every intention of doing it again, so long as the economy continues to expand at its current rate. And while many will scoff at the idea of rising interest rates, they are actually a strong indicator that the economy finally has its legs underneath it. All things, considered, rising interest rates are a great sign of things to come, but I digress. While higher interest rates may, indeed, be great news for the state of our economy, they are working against those who plan on buying a home sometime in the near future.
What’s more, despite just about every analysts predictions that mortgage rates would continue to increase incrementally over the course of 2017, they are now where they were in mid-November — and a quarter point below their highs of mid-March. That’s not to say rates aren’t still expected to jump in the time we have left this year, but it does indicate a great time to buy a home.
Rates on 30-year fixed mortgages are now somewhere in the neighborhood of 4.17 percent, and their fixed counterparts are approximately 3.54 percent. Not to be left out, adjustable rate mortgages are about 3.84 percent. Historically speaking, those numbers are incredibly low, but I wouldn’t expect them to stay that way. In fact, I am still convinced mortgage rates are going to escalate throughout the year, as previously predicted. What we are seeing now is a sign that anyone considering buying a home should go ahead and do so; we may not see rates like this again for the rest of the year.
2. Lack Of Affordable Inventory
Despite what you may have heard about today’s inventory levels, or lack thereof, we are not currently in the midst of record low availability. According to the Washington Post, “there were almost 5 percent fewer homes fully available,” in 2014 “than there are right now.” It is worth noting, however, that it’s not necessarily the amount of inventory that poses a threat to today’s homebuyers, but rather the amount of affordable inventory. In just a few short years, we have seen a monumental price shift working against those with minimal budgets.
As recently as April 2014, “45 percent of all homes on the market were priced less than $500,000, and homes in this price category constituted 67 percent of all sales. Today, 33 percent of homes are priced less than $500,000, and the percentage of total sales has dropped to 62 percent of the market,” said the same article from the Washington Post.
Affordable inventory isn’t the only fundamental on the decline; inventory overall has lessened in recent years. In fact, available inventory has dropped by as much as 15 percent. Buying a home is, therefore, made all the more difficult when there are no homes to buy in your price range.
It’s a sad truth, but a reality nonetheless: inventory is probably going to get worse before it gets better. That said, if you are considering buying a home, the sooner you can do so, the better. With each day that passes, inventory constricts further. If you wait too long, you might wait yourself out of the buyer pool altogether.
3. Prices Will Continue To Increase
Not only is affordable inventory down — the number of homes priced less than $500,000 is down 26 percent — but industry experts and pundits alike are convinced prices will continue to rise. And while that’s a great sign for the economy, it’s not the greatest news for someone intent on buying a home. That means the longer you wait to commit, the more your dream home could end up costing you.
According to the National Association of Realtors (NAR), “the strongest quarterly sales pace in exactly a decade put significant downward pressure on inventory levels and caused price growth to further accelerate during the first three months of 2017.”
In the first quarter of this year, we saw the national median existing single-family home settle comfortably at $232,100. For those of you keeping track, 2017’s average is roughly 6.9 percent higher than the same time last year for similar homes ($217,200). Not only that, but we haven’t seen prices grow that fast since the second quarter of 2015. So make no mistake about it; prices are increasing, and fast.
Buying a home is something everyone should strive for. However, it’s worth pointing out that waiting for the right opportunity may not be your best bet. In fact, the recent lull in mortgage rate increases could signify a great time to buy. The three fundamental indicators I discussed above are only expected to make things harder for those looking to buy sometime soon, so I recommend acting sooner rather than later.