Should I Buy a Home Now?
Should you buy a home now or hold off until 2024? This is the dilemma facing potential homeowners in the current property landscape. The pandemic saw a surge in home prices, and efforts by the Federal Reserve to control inflation have caused a spike in mortgage rates.
This scenario has prompted many potential buyers to lean towards waiting. A recent survey from the Fannie Mae Home Purchase Sentiment Index in August revealed that a staggering 82% of consumers think now isn't the right time to invest in a home.
Yet, there's a silver lining for buyers. After facing challenges for several years, the tide seems to be turning in many regions. The Case-Shiller U.S. National Home Price NSA Index indicates that until February, there was a seven-month consecutive dip in home prices, although they've begun to climb again. Cities like Seattle and San Francisco, which previously experienced soaring prices, have now witnessed significant annual reductions. Furthermore, a study by the real estate firm Knock anticipates that over 30 metropolitan regions will lean in favor of buyers by year-end, including sought-after locations like Atlanta, Charlotte, Dallas, and Phoenix.
So, is it the right moment to invest in a home? Or should one remain patient, hoping for a substantial decrease in prices or rates? And what about the possibility of an economic downturn? Here are some essential factors to guide your decision.
Is it wise to invest in a home now?
Mortgage rates have reached their highest in over two decades as of early August. Coupled with the resurgence in home prices, this might deter potential buyers. However, purchasing now allows you to begin accumulating equity straight away. It also shields you from potential future hikes in mortgage rates, which can strain your monthly finances and lead to higher interest payments over the loan's duration.
Stacey Froelich, a broker with Compass in New York City, advises, "If you've found your dream property, don't hesitate. Market timing is unpredictable, and homes should be viewed as long-term assets."
Melissa Cohn of William Raveis Mortgage in Connecticut shared with her subscribers, "When rates decrease and buyers re-enter the market, property values will surge. It's essential to remember, 'You commit to the home and flirt with the rate.' Refinancing is always an option down the line."
If you can affirmatively answer the following, it might be time to invest:
Do you possess a good credit score? Before taking a loan, assess your creditworthiness. Premium mortgage deals are accessible to those with scores of 740 or higher. In 2023's second quarter, the median credit score for mortgage applicants was 769, as per the Federal Reserve Bank of New York. But keep in mind! There are many options out there if you have less than stellar credit. Talking with a mortgage advisor can help figure out what options you may have.
Have you accumulated a substantial down payment? Ensure you have a significant reserve after the down payment. Lenders are more confident when borrowers have extra funds as a safety net. Alternatively, there are down-payment assistance programs such as Hometown Heroes that leave you paying zero down. Reach out to learn more!
Do you intend to reside in the property long-term? Remember, there are additional costs associated with buying a home. It's prudent to ensure you won't relocate soon or have the financial stability to retain the property and lease it. Selling shortly after purchasing can lead to tax complications.
Should I invest in a home or delay until 2024?
The decision ultimately rests with you. If you meet the above criteria and are financially secure, you might consider starting your property search.
However, if you're hoping for more favorable mortgage rates, patience could be beneficial. Rates have been fluctuating, peaking at 7 percent in mid-July, then dipping to 6.88 percent, only to rise again to 7.12 percent in August. Such minor shifts can significantly impact long-term affordability.
For instance, using Bankrate's calculator, a $350,000 property with a 20% down payment at a 6.88% rate results in a monthly payment of $1,840 for a 30-year loan. At 7.12%, this increases to $1,885, which accumulates to an additional $16,000 over three decades.
Predicting year-end rates is challenging. However, waiting might be more logical if:
Local property values are decreasing.
There's a surge in available properties in your region.
Your financial health needs improvement.
Examine your desired region The decision to buy now or later largely depends on your target location. Property markets can differ significantly even within the same state.
For instance, recent data from Redfin in Texas shows a more than 6% annual decrease in Fort Worth's median home price, which stood at roughly $342,000 in June. In contrast, Dallas, a short distance away, has a rising median of $454,525. It's crucial to collaborate with a knowledgeable local realtor to navigate these nuances.
Final thoughts
While the current property market might seem daunting, delaying too long has its challenges. Thoroughly assess your finances, gauge the local market pulse, and consult with an experienced realtor to decide whether to invest now or await a more favorable market.
