Why Waiting to Buy a Home Could Cost You
Are you thinking about waiting to purchase a home? Think again. According to many experts, timing is everything and those who wait could lose out on an opportunity of a lifetime. For many consumers, the stars are aligning to purchase a new home due to historically low mortgage rates, warmer weather giving way to a busier home buying season and the fact that buying is still traditionally cheaper than renting. However, these factors are shifting and missing out on homeownership now could cost you in the long run.
Interest Rates Won’t Stay Low Forever
Though interest rates have crept up slowly this year, they have still remained historically low. However, a recent forecast by the Mortgage Bankers Association predicts that rates for a 30-year-fixed mortgage is expected to rise to 5 percent by the fourth quarter of this year and 5.3 percent by the end of next year.
Although that doesn’t sound like much of a jump, a rise in as little as a quarter of a percentage point can mean $100 extra per month in mortgage payments. According to Yahoo! Homes, the expected rise is because the feds will begin raising rates six months after they stop purchasing mortgage bonds, which is expected to happen next year.
Unbeatable Spring and Summer Season
The sluggish winter has finally given way to the more lucrative spring and summer seasons, typically the busiest time in the real estate industry for buyers and sellers. Traditionally, most people avoid listing their home during the brutal winter season and instead opt to put their home on the market during the summer when kids are of out school, making it easier to move. Therefore, if you want the largest selection of inventory to select your dream home, warm months are your best bet.
“People just know that there are most listings coming in the spring,” said Lawrence Yun, chief economist for the National Association of Realtors.
Buying is Still Cheaper than Renting
Throughout the majority of the country, buying has traditionally been cheaper than renting. According to Zillow, homeownership is currently cheaper in all of the 100 largest metro areas. A recent breakeven horizon analysis from the online real estate database found that nationally the breakeven horizon is only 2.1 years. In other words, after 2.1 years homeowners begin to have more money and assets than they would if they had rented the same home for the same time period.
“Many renters may ask themselves why renew a lease, when you can break even on the same home in less time in many areas,” said Zillow Chief Economist Dr. Stan Humphries.
So why buy now? It’s more affordable to buy a home today than it has been in decades, however, the market is beginning to shift which means homebuyers need to act quickly. The gap between renting and buying is decreasing as a result of rising mortgage rates and rising home prices. Currently buying is on average 38 percent cheaper than renting, although it was 44 percent cheaper last year. With homeownership linked to a host of benefits including creating equity and stability, those who are thinking about homeownership should consider taking the plunge during this period of high affordability.