It’s no secret that the housing market has been a big topic of conversation for quite some time now. According to the S&P CoreLogic Case-Shiller National Home Price Index, home prices have been up 34% since the start of the pandemic, and it’s no surprise that many Americans are becoming more hesitant in purchasing a new home as inflation and interest rates are on the rise. In just the last two months, mortgage rates have increased more than two full percentage points leaving many wondering if it’s still a good time to purchase a new home. In this blog post, we will discuss some of the reasons why investing in a new home can still be a positive long-term investment overall, no matter the immediate circumstances.
Rising Rates Could Cool the Market
Today’s housing market is tough for buyers, especially those wanting to buy for the first time. However, buying a new home is subjective, and more about your personal finances than it is about the market. While it’s always nice to try for a better rate to have a smaller monthly payment, if you can afford a home, it’s never really a bad time to buy.
Also, rising interest rates will likely help reign in the excessive home price growth of the past two years allowing for a little less competition when purchasing a home. Bidding wars will most likely cool down as many borrowers reassess their goals, providing some relief for home buyers who would no longer have to offer drastically over the asking price in order to win a contract. As homes sit a little longer on the market, time can be on your side to allow for you to really find the home you want.
Is Renting the Answer?
Unfortunately, as home ownership becomes more out of reach for families, demand for rentals will increase and rent will continue to rise. Those who do not have a solid savings or income will obviously have less budget to work with and could be forced to rent instead. While renting has its advantages, like not having to pay property taxes or homeowners insurance, at the end of the day, paying really high rental rates can become even more financially challenging long-term than buying. If you have a healthy credit score, have enough money saved up for a down payment and closing costs, and plan to stay in the same area for more than two years, the benefits to homeownership will always outweigh the cost of renting.
The Risks of Waiting to Buy
Many buyers could be tempted to wait on lower interest rates or slower home price growth before they enter the market, and while it can be tempting, waiting for mortgage rates to drop to a certain range could mean losing out on the home you truly wanted, getting priced out of the listings you could have previously afforded, or time lost on waiting for lower rates that may never materialize. Historically, mortgage loans today are still affordable and for the most part plan on staying that way throughout 2022.
If you are still considering purchasing a home in the near future, preparation is always your friend, and rising interest rates shouldn’t deter you from moving forward. Getting pre-approved for a loan is a great first step and you can start by finding a great lender to help you figure out your next steps and walk you into the best options for your budget. Our team at Marsh Landing Realty are experts in buying and selling real estate and would be glad to help you navigate the process! Contact us today to get started.