Potential home buyers are endlessly trying to time the real estate market. Who can blame them? Everyone wants to buy a new home at the best price, with the lowest mortgage interest rate. This will give your dollars the most power. However, if you have been waiting on the sidelines, hoping for better prices or interest rates, now is the best time to buy your next home. If you wait, you can expect to pay more the deeper we go into 2017.
Both home prices and interest rates are going up at the same time, and the real estate market shows no signs of this changing anytime soon. As recently reported in Business Week, home prices have increased to the highest point since June 2006, the peak of the housing boom. This trend has been spurred on, in part, because of strong employment numbers and historically low-interest rates. However, the prime driver is a constrained inventory of available homes.
Moreover, new and existing home sales have reached their best levels since the recession. There is now a situation where demand is outpacing the housing supply. While this is not the best news for home buyers, it is great news for home sellers. The real estate market is trending to a sellers’ market, placing the negotiating advantage in their hands.
Nonetheless, increasing interest rates may cause an affordability issue for some home buyers. As reported on Yahoo News, “higher mortgage rates have already driven monthly mortgage payments up 7% since the presidential election.” Since the U.S. Presidential Election, the equity markets have taken off, reaching historic levels. As investors have jumped more into stocks, rates for things like treasuries and bonds have grown. On December 14th, the 10-year Treasury rate reached 4.19 percent, up from 3.64 percent on October 12th. This increase has had a direct impact on fix-rate mortgages, pushing the average interest on 30-year mortgages up to 4.18 percent.
So, why is now the best time to buy a new home? It is because the current outlook is higher home prices and higher interest rates. Ultimately, you will not find a home at a better price, with better terms, in the coming future. If you wait, it can cost you your dream home. As home prices and interest rates continue to climb, it will affect your monthly payment and its ratio to your income, limiting your choices.
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