Buying a home by the end of 2017 may be the best thing for you and your family since interest rates have started to climb. Inventory is relatively low on average and the prices for these homes are increasing. If you don’t jump aboard the real estate train soon, you might be too late.
It is tough to buy a home these days because there are not that many options but if you wait they you could be gambling that the market will be better in the future. That really is not a smart gamble either. If you have been toying with the idea of buying, or you anticipate a life change that might force you to move, you should be buying as soon as possible. Why?
Rates Are Rising
In 1981, when mortgage rates hit 81% and seemed to rise every day, single digit rates seemed like an impossible dream. However, last August mortgage rates bottomed out at 3.55%. Now that the Federal Reserve finally decided to raise its key interest rate, mortgage rates have been climbing slowly. Today the average rat is just above 4% and by 2019 rate could easily climb to 6%.
Before you freak out keep in mind that rising rates are not necessarily a deal breaker for buyers. The National Association of Realtor calculated that a rise from 4.2% to 5% would increase average monthly mortgage payments by $90, which isn’ nothing but it’s not catastrophic. On the brighter side of things, when rates go up, competition and prices often go down. So buyers don’t panic, higher mortgage rates eventually cause sellers to be more flexible on pricing.
Inventory is Shrinking
In November 2016, there were only 1.85 million homes for sale, which is a 10% drop from the year before and that trend continues to drop. Real Estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means in most areas of the country, buyers have more homes to choose from today than they will next year. The bottom line is if you wait to start looking for a new home, you face stiffer competition for fewer homes.
Home Prices Are Still Rising
The bad news for buyers is that home prices now stand higher than before the 2007 crash, increasing 5% from 2015 to 2016. Housing experts expect an additional 2% to 3% jump in 2017. How high prices will rise and how long they will remain high is anyone’s guess. Rising mortgage rates and the new Trump administration have introduced uncertainty into the real estate market. The good news is if you jump into the market now, you just might make it before those doors close.