The last few years have been difficult for homeowners. Between sagging home values and general economic malaise contributing to a fear of job loss, having to make a fat mortgage payment becomes harder and harder.When the value of your home is going up and you aren’t worried about losing your job, that mortgage payment feels great! You’re building equity, you’re living comfortably in your home, and you’re happy.
If you aren’t a homeowner, you’ve probably been breathing a sigh of relief every time they talk about home prices on the nightly news. You’ve also had your eye on interest rates, which are at all time lows. With prices low and interest rates low, now is actually one of the best times to buy. If you’re on the fence, here are a few good reasons why you might want to take the plunge now.
The sagging home prices that give homeowners heart burn means that a prospective home buyer is getting good value. When I was looking to buy a home in 2005, a year before the peak of the housing bubble, homes were going for above asking price two days after the open house. Nowadays, homes sit for months and when they are sold, rarely sell for their asking price. You can put in a low ball offer these days and it might be the only one the seller gets!
Many Homes to Choose From
Take a quick peek at the number of homes for sale in your area and you’ll be astounded at the “inventory” available. I like to use Redfin because their tools are fantastic but any service will be able to show you just how many homes are out there.
This is good for you for two reasons:
1. You can probably find several appealing houses, which means you can afford to wait and not overpay for a home you like. If you put in an offer and the seller doesn’t bite, you can always go after another house.
2. Supply and demand is working in your favour now. There is an ample supply of homes and a dearth of buyers, so prices will go down.
Interest Rates are Low
Banks are more discerning about their loans and to whom they lend to, so expect more paperwork and a longer closing time, especially if you have irregular income. That said, the rates they’re offering at extremely cheap. Wells Fargo, as of June 20th, lists the interest rate on a 30 year fixed mortgage is 3.75%. If you can swing a 15 year fixed mortgage, the rate drops to 2.875%. The combination of low interest rates and low prices means you will have 30 years of relatively inexpensive housing payments – which is a great hedge against inflation.
Also, the likelihood that interest rates will go up increases with each passing day. As the economy recovers, interest rates will likely rise as the Federal Reserve will react to inflationary pressure. Whether it happens next year or in three years is anyone’s guess, but it will happen.
Home Builders Offer Incentives
If buying a new home, rather than a “used” home, is what you want then now is a fantastic time to start talking to builders. The economy may be recovery but home builders still need to meet their quotas and without eager buyers lining up, they need to offer incentives to the ones that do. During the housing boom, eager investors would line up outside the builder’s door, before they opened, in order to get a property. Now, the builder have to sell those new constructions the old fashioned way.
It’s not uncommon for builders to throw in special perks like televisions, eco friendly features to help you save on electricity, or even throwing in better home features. You can use this to your advantage!
Lastly, don’t buy the hype that housing prices will go up soon. Listening to that is like trying to time the stock market – just know that right now there are a lot of homes and you should take your time to find the one that’s right for you. If you start the search now, you won’t necessarily find the absolute bottom of home prices but you’ll be fairly close.
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