Written by Peoples Home Equity, one of our amazing financial lenders.
The old adage in real estate is the best time to buy was 30 years ago, the 2nd best time is now. With interest rates at all-time lows, it really is an opportunistic time to buy a home. Lower rates mean increased buying power. Over the next 5 years real estate prices are forecasted to increase another 20%. This is due to strong demand, relatively low unemployment in Utah, and lack of housing supply – other words, simple supply and demand.
For every one percent increase in interest rate a buyer loses 12% in buying power. Think about how much that is:
1% decrease in interest rate = 12% more buying power
Data from the Wasatch MLS shows that median sales prices are up for sellers and the inventory for sale homes is at a 14-year low which means housing will sell quickly and often have multiple offers.
Points to consider when looking to buy a home:
- While monitoring if home values are rising or falling are important metrics, the best time to buy a home is when you can afford it.
- Buyers should explore their loan options and take advantage of low interest loans.
- Attempting to time the market is not a good idea. However, interest rates are currently at historic lows, so now is a good time to buy.
Related: The Ultimate Moving Checklist
Buying a home can be intimidating, especially in a pandemic no one has seen before. Yet, there are still some positives to come from this situation.
Rates are at a historic low right now in these unprecedented times. This is fantastic news for first time home buyers.
“The summer is heating up as record low mortgage rates continue to spur homebuyer demand.” - Chief Economist. Freddie Mac.
FreddieMac stated that mortgage rates right now are the deal of the century with how low rates are. With appreciation on homes expected to rise by 22% in the next five years, now is the time to buy a home.
Fannie Mae has seen a big rebound in June’s Home Purchase Sentiment Index (HPSI), with 61% of respondents saying now is a good time to buy and 41% feel it’s a good time to sell. This is a huge jump from survey lows just 2 months ago.
Also rebounding: realtor.com’s latest Housing Market Recovery Index posted the largest nationwide weekly gain since its inception, ending up just a smidge below its pre-COVID baseline.
Affordability is also a huge factor in deciding to buy now. In 2020 we are looking at an affordability index in the 140’s, which is the third lowest in the last decade. (The Affordability index is made up of the home price, interest rates, wage growth, and jobs. A reading of 100 means that a household earning the median income can afford the median home price, with 20% down.)
Buying an existing home or building a new home now will give you the buying power and affordability to obtain a place to call your own!
Visit Peoples Home Equity's website for more information!