Home buying has been all the craze over the past year. The sudden outbreak of the global health crisis prompted a mass migration of people from densely populated city centers to the quiet rural suburbs. Add this to the fact that mortgage rates have gotten extremely low, and it sets the stage for a truly booming housing market.
This first started at the height of the pandemic, establishing a record high for home sales after 14 years. Moreover, the hype around buying a new property doesn’t seem to be showing signs of slowing down any time soon. Just in January of this year, new home sales rose by 23 percent compared to the previous year after reaching 6.7 million.
The Right Time
With all your friends, family, and even acquaintances buying new homes left and right, you might be feeling a little left out. Apparently, there’s no better time to buy a new home than right now. The biggest question, however, is: should you? Your answer to this question should primarily revolve around the reason why you want to own a property. Not just because the circumstances are ripe and you simply want to capitalize on the opportunity.
Setting aside your current financial picture, you should focus on truly wanting to create a home for yourself or your family. Home buying is quite possibly one of the costliest purchases you’ll ever make in your life. It’s no walk in the park, and the paths you’ll have to navigate through will also be filled with numerous challenges. As a potential home buyer, here are a couple of things you’ll have to prepare for.
Bang for the Buck
Shopping for a home before looking for the best mortgage lenders that will support the purchase of a property is among the most common mistakes that plenty of home buyers often make. Before anything else, make sure you already have all your finances in order. Choosing your dream home can follow after this.
This is especially crucial now given how the minimum qualifications for getting a mortgage and the entire borrowing process have been altered by the current health crisis. As much as possible, find a lender that will offer you the best deal and request a pre-approval. Doing so will effectively set your expectations by allowing you to gauge the price range of homes you’ll be able to afford.
On the Down Low
It’s important to take note that most economists are expecting mortgage rates to remain extremely low throughout the remainder of the year. Forecasts from established institutions are putting the 30-year fixed-rate mortgage to average at 3.15 percent coming from the 3.025% average in the previous year. However, rates will vary depending on your chosen lender and how they assess your financial picture. Simply affirming the importance of comparing lenders first before looking for a property.
Way up High
While mortgage rates continue to traverse the lower end of the spectrum, the same can’t be said for the prices of homes. Over the past year, record-low rates were counteracted by the rapid increase in home valuations. The pace at which prices will grow does seem to have slowed down though, which is a bit of good news to be had.
Home prices are estimated to increase by 5.9% throughout the year, which is significantly less compared to the 10% spike that was observed in 2020. Additionally, appraisals will also usually be affected by seasons. According to data, June and July will be the most expensive periods for you to buy a home. On the other hand, prices are generally at their cheapest in January and February.
Fierce Competition
Keep in mind that you’ll also be caught up in a seller’s market, which is a concept that is used in real estate to indicate that there are more buyers than there are homes up for sale. Again, demand is extremely high right now meaning homes will also be sold a lot quicker. On average, homes will usually remain on the market from anywhere between 51 and 76 days depending on the season.
If you’ve already found a property that’s within your capabilities and still in relatively good condition, chances are you won’t be the only one making an offer on it. This will require you to be a lot more flexible when it comes to negotiations and compromises. In certain cases, you’ll also have to be prepared to enter into a bidding war if you’re really set on a particular house.
The Right Reasons
There is a lot of enthusiasm when it comes to home buying at the moment, and wanting to join in on it is reasonable. However, you’ll have to genuinely understand the necessary conditions your local housing market is currently in and the processes that surround it. Buying a home requires more than just being financially ready, this is just a part of the journey. Ultimately, your decision will also have to be motivated by your personal needs and your commitment to fulfilling them.