Americans are in a hurry to buy a home right now. But should you be one of them?
Sales of former homes in the U.S. rose 24.7 percent between June and July to an annual adjusted annual rate of $ 5.86 million, the National Association of Realtors reported Friday. Not only did the percentage increase represent a record, but the sales volume was the highest the US has seen since 2006.
It’s a brilliant turnaround from just a few months earlier when the coronavirus pandemic caused record-breaking declines in sales as Americans stayed home to prevent becoming ill.
For the most part, the bumper demand for housing is an indication that Americans intend to make up for lost time. Many economists are of the opinion that what we are seeing now is essentially a delayed spring of buying spring.
“The housing market has been brought to a sugar level by government stimulus and a pandemic – driven rush to low – density housing,” said Daren Blomquist, vice president of market economy at Auction.com, a real estate outlet website.
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“Foreign buyers will be better able to position themselves for success as homeowners if they understand that this sugar level will not last and ensure that their decision to buy is based on long-term factors that affect their ability and willingness to commit to an affordable amount of debt over the next 30 years, “Blomquist added.
But even with home sales activities reaching record levels, many Americans remain unsure whether now is the right time to make the biggest financial decision of most people’s lives. The sentiment index for home purchases by Fannie Mae FNMA,
diminished in July because people’s views on home buying conditions surprised in tandem with emerging cases of coronavirus in much of the country.
Here are the factors that experts say you should consider:
Interest rates remain close to the lowest times
From a financing perspective, buying a home right now is a bit of a no-brainer. And in fact, record-low interest rates have helped boost the rise in home sales.
“No matter what you’re looking for, this is a great time to buy because the current low interest rates can stretch your spending power,” said Bill Banfield, executive vice president of capital markets at Quicken Loans RKT,
“With interest rates available in the two’s, a buyer can pay much more home than they could have just a few years ago.”
Although many economists expect the interest rate to remain roughly so low for a while, they are unlikely to get a full army. Mortgage rates have fallen as a result of the pandemic and its effect on the economy. So if a vaccine as a treatment for COVID-19 were discovered, rates would probably skyrocket.
“There are no guarantees,” said Tendayi Kapfidze, chief economist at LendingTree TREE.
“That affordability may decline in advance.”
There are not many houses for sale
While the adage goes on, you can not buy what is not for sale. And at the moment, well, there is not much for sale in most of the country.
“Now is a great time to buy because of unbelievable mortgage rates, but a terrible time to buy because of inventory,” said Ralph McLaughlin, chief economist and senior vice president of analytics at financial technology firm Haus.
As McLaughlin put it, buyers will have a difficult choice right now: Lock yourself in at a low rate and settle for what’s on the market, or wait for your dream home and risk a higher interest rate.
“If you’re planning to find your dream home, it’s probably better to wait,” McLaughlin said. “But if you plan to trade in a few years, there’s no terrible time, other than low inventory, of course.”
Competition drives faster sales and higher prices
The tight inventory of homes for sale at the moment is met with a large swipe of eager buyers. And that’s a recipe for rising prices and offering wars.
The median prices were up year-over-year by 10.1% for the week ending August 15, according to a recent report by Realtor.com. This is the fastest growth in list prices since January 2018. Due to low interest rates, prices may rise faster.
And homes are coming at the rapid pace of the market. More than two-thirds of the homes sold in July were less than a month on the market, the National Association of Realtors reported. “That environment with quick decisions can challenge some buyers, especially first-timers who are new to the process,” said Danielle Hale, chief economist at Realtor.com.
The good news is that high prices may coax some sellers in the market, said Holden Lewis, housing and mortgage expert at personal finance site NerdWallet. More inventory in the market would keep an eye on prices and competition.
Falling prices are not necessarily what buyers should expect. “If prices fall significantly and inventory increases dramatically, that means the economy has taken a hard turn for the worse and you may have priorities other than housing,” said Robert Frick, a business economist at the Navy Federal Credit Union.
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Where you live and the lifestyle you lead are important
Like any realtor you will tell, all real estate is local. That what happens in one city across or at the national level may not have much significance for what you will encounter in the housing market.
“Are you an owner moving from a fast growing real estate market… to a housing market where the pace is a little less frenzied? If so, then this might be a good time for you, ”said Hale.
For example, if you own a home in a New York City suburb but want to live closer to the action, say in Manhattan, now might be a great time to buy. In recent Zillow ZG,
report throws cool water on the common wisdom that people flee to the suburbs – with some exceptions. Zillow found that in most parts of the country suburban markets did not strengthen at a disproportionately faster rate than urban markets.
But in Manhattan, home values are actually 4.2% lower than last year and properties are staying on the market longer.
Yet he is the biggest factor for most people in deciding whether to buy their lifestyle. Traditionally, most home-buying decisions revolve around milestones such as getting married, having children, or retiring. Millennials are growing their families and reaching their heyday of home-buying. And with more people working at home, the need for more space is a factor for many affluent buyers.
If you find yourself in that position, then experts suggest not to venture. If you have enough in savings to cover the down payment and additional cost of buying a home, pick yourself a low rate and look for a home that fits your needs.
On the other hand, if you are “between jobs or working in a sector that has been particularly hard hit by the recession, it may be a better time to wait,” Hale said.
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