Is It Still A Good Time to Buy a House or Should You Wait?
If you’ve been looking for homes for sale in Long Beach or anywhere, you know the housing market has been red hot. With skyrocketing prices and so many cash buyers, it has been hard for those who want to buy a new home.
Now, there is another concern, rising mortgage rates along with high prices. Many potential home buyers ask themselves if they should buy now or wait. It is still a seller’s market, and home inventories are still low. But in some cities, prices have stabilized and even started to come down.
Currently, the average 30-year fixed mortgage rate is around 5.5%. The Federal Reserve is expected to raise interest rates several more times this year. Federal Reserve actions do not directly affect mortgage rates, but they can indirectly affect them. Mortgage rates typically follow the direction of the 10-year Treasury yield.
Inflation also affects mortgage rates. In June 2022, inflation was last reported at around 9%. When inflation is rising, mortgage rates rise.
Should You Buy a House Now?
It is hard to time the market or guess what inflation will do next. The decision to buy a home should be based on more personal wants and needs than economical factors. If you were to wait until rates and or home prices come down, you could potentially miss out on the home of your dreams.
The main question is how long you plan to live in the home. Buying a home is an investment and a place to live. Before you decide to buy a home today, look at the math and your financial situation.
The difference in mortgage rates can matter. For example, if you took out a $450,000 loan amount, the difference between a 4 percent mortgage and a 5 percent mortgage results in a 13 percent higher payment. And the amount of interest paid over the life of the loan will be higher. To help with your decision, look at the following three questions:
- What is your credit score? If it is at or above 740, you should be able to get a better mortgage rate.
- Do you have enough for a down payment? Lenders want to see that you have enough for a down payment and also a cushion of money for other expenses.
- Closing costs are between 2 and 6 percent of the property value. It makes sense to buy if you are not planning to move within the next ten years.
Should You Wait?
Zillow recently said they expect home prices to start easing between now and 2024. They also believe that home inventories will rise by 2024 to that of pre-pandemic levels. More houses for sale will result in lower prices.
If you find a house you love, you should buy it if you’re financially ready. If mortgage rates drop after you buy, you can always Refinance in the future.
If you have to wait until prices come down, use the time to pay off debt and save more money for a larger down payment. Talk to local real estate agents and stay informed of your local real estate market.