Why You Should Get Off the Fence About Buying a Home
Why You Should Get Off the Fence About Buying a Home
As the housing market continues
to stabilize and show more signs of health and improved conditions, you might
be thinking more seriously about purchasing a home, right? Here are some
reasons why it's (still) a good Idea to get off the fence — sooner, rather than
later.
Mortgage rates are (still) low
During the recession, the rate
on the 30-year, fixed-rate loan averaged 4.32%. Now, rates are close to that,
and there's no recession! That means they've got nowhere to go but up —
particularly because the Federal
Reserve is expected to end its bond-buying program, which has been credited
with pushing mortgage rates to historic lows, in October. Granted,
rates aren't expected to skyrocket overnight, but don't think that a small uptick
wouldn't affect your budget. In fact, if rates were to go up by just 1 percentage
point, your purchasing power would be reduced by a whopping 11 percent. To put
this in further perspective: If
you could afford a $400,000 loan at 4 percent mortgage rates, you could afford
a loan of just $356,000 at 5 percent (after a 1% increase in rates)
An even smaller rise in rates —
say from 4.5 percent to 5 percent — would add $75 to the monthly payment on a
$300,000 house with $50,000 down. To see how much waiting could cost you,
specifically, check out Zillow's recent analysis here. (http://www.zillow.com/research/costs-of-rising-interest-rates-7287/)
Home prices are (still) affordable
While home prices, nationally,
continue to rise, up nearly 7 percent from July
2013, they are still 11 percent
below their 2007 peak. And get this: Home buying is more affordable now than
ever before. According to a recent Zillow analysis, U.S. home buyers at the end
of the second quarter spent 15.3 percent of their incomes on a mortgage, far
less than the 221 percent share homeowners devoted to
mortgages in the pre-bubble days. This situation won’t last forever, especially
as mortgage rates continue to rise. (According
to Zillow Medford, OR is forecasted to continue moderate appreciation over the
next year at a rate of 4.6% increases in their home’s values)
Buying is (still) cheaper than renting
No doubt, buying a house is a significant purchase, but in a majority of thecountry, It’s (still) cheaper than renting. In fact, in half of metros in the U.S., buying beats renting after only two years. This can be attributed to historically high rental prices that have helped skew the rent vs. buy decision toward buying for those who can afford it So if you can afford to buy, now is the time as rents aren't getting any cheaper!
KEY POINTS from the Zillow
article:
- For most of the past three decades, mortgage rates have
declined. But over the next several years, they are projected to increase
modestly.
- As rates rise, new home buyers will confront higher
financing costs and monthly mortgage payments. For many, this will mean
tightening their budgets and sacrificing some luxuries they may take for
granted today.
- If rates rise by 1 percentage point, monthly mortgage
payments will increase between $710 (San Jose) and $65 (St. Louis).
Additional Reading:
The
Real Costs of Rising Interest Rates for Homebuyers
Zillow Post by: Aaron
Terrazas Posted date: August 6, 2014
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