Home Buyers Should Act Now
Many people want to purchase a house right now, but are intimidated by some of the headlines regarding today’s housing market. You would have to be living under a rock to not hear about today’s super seller’s market. Demand to buy a house is through the roof, but there just is not enough housing inventory to meet the demand. In turn, buyers are getting into bidding wars just to make offers that are for far more than the asking price. All of this is intimidating and some might think it is just better to wait out the market and buy a home later. The truth is that waiting is a big mistake. The team at Peoples Choice Mortgage has three reasons why waiting to buy a home is a bad idea.
Rent Is Increasing In Every Market
Today’s super sellers market is causing rent to reach higher prices and now is the time to get on board. Single family landlords are aggressively hiking up the price of rent to test the limits of a super demand for suburban housing. This trend started in December and has been increasing. This could be seen as many groups, like American Homes 4 Rent, have increased their rent. The organization owns 54,000 houses and increased their rent by 11% on vacant properties. Rent prices are soaring because an increase in optimism surrounding vaccines has given homeowners hope about returning to a normal life. Another institution that is similar to American Homes 4 Rent, Invitation Homes Inc., also increased their rent by a similar percentage. They are the largest landlord in the industry, so this will set a precedent for other landlords to adjust their rent prices up.
More evidence of the increasing rent prices is found in the first quarter 2021 reports for American Homes 4 Rent. Revenues from rent for single family properties increased to $312.6 in the first quarter of 2021. This is compared to the $287.3 million in revenue that happened in the first quarter of 2020.
Even though housing prices are rising, once you buy a house, your housing costs become fixed. When you use a mortgage to finance a home purchase, you get a monthly mortgage payment. As long as you do not use an adjustable rate mortgage to finance your home, your monthly payments will stay fixed. This gives you budgetary predictability. Rent does not do that for you. As the above data indicates, rents can keep going up and up.
Mortgage Rates Will Continue To Rise
Mortgage rates are also projected to rise, so you should buy your home as soon as possible. Mortgage rates are now sitting around 3%, but this is going to change. Mortgage interest rates are expected to rise as we slowly exit the pandemic. There are several experts who have made predictions about the mortgage rates and where they will end up. The Mortgage Bankers Association has a forecast of 3.9% for future mortgage rates. The National Association of Realtors, Fannie Mae, and Freddie Mac all expect a mortgage rate that is around 3.5%. Mortgage rates are increasing because more people are starting to get comfortable. Vaccines and the opening of states is giving a new kind of confidence that makes people want to invest in a home. As a result, the mortgage rates are starting to increase in response to the expected demand.
It is important to note that an increase in the mortgage rate will cause you to pay more for your home, overall. Higher mortgage rates result in larger monthly payments and much larger costs over the full life of your home loan. If you want to save money on buying a new home, it would be best to start searching for a home now. Take advantage of the mortgage rates before they rise to new heights as the pandemic rolls over.
Nothing Is Stopping Rising Home Prices
Home prices are also expected to rise greatly. Several reliable forecasters, such as the Mortgage Bankers Association, Fannie Mae, Freddie Mac, and others have made predictions about future home prices. When these projections are averaged, the result is a 7.7% increase in home prices. This jump is substantial and could change how easy it is to get a home in the future. Demand will continue to be strong for housing, so rates will be based on how quickly listing inventory gets to the market. An increase in home prices means that buyers will have to pay more for down payment fees when purchasing a home. It also means that buyers may have to take out a larger loan. This would make it harder for buyers to purchase their dream home in the future.
While it makes sense, in theory, to merely wait out the current market and buy a home for cheaper, the trends do not support this strategy. There is nothing to indicate that you can merely wait out this market and expect home prices to decline or even level off in the near future. We are witnessing an incredible rise in the housing market and it appears poised to continue into the future. Delaying your home purchase now in the hope of discounts will only end up costing you a lot more in the long term.
Final Thoughts
Rising rents, rising mortgage rates, and rising home prices is a trifecta of misery for anyone who is delaying buying a home. All of the projections point to more money coming out of your pockets if you wait to buy a home. The price of rent starting to rise sets a strong barrier to entry for buying a home. With the higher price, you will pay more monthly to the property and sign a contract agreement that costs more money. Mortgage rates also matter here. An increase in mortgage rates would result in you paying more money overtime for your loan. With rates projecting to rise as 2021 ends and 2022 begins, it’s best to lock in a low fixed rate now. Home prices will also force you to spend more money in the future as demand continues to stay strong for housing.
Don’t wait for prices to rise. If you want to take advantage of current historic lows and save money, contact us! The team at Peoples Choice Mortgage is here to help you through every step of the process. Feel free to use our complimentary mortgage qualifier if you are interested in applying for a home loan. This will help you find out where you stand so we can help find the best options for you. We are here to give you guidance and help you get the dream house you are looking for.
