The real estate market is on fire and sellers are winning. But what about the buyers?
If you read the news, you will see that mortgage rates are historically low today. Yet many potential buyers find it difficult to purchase a property for one key reason: Home prices keep skyrocketing.
In July, the median price of a home sold climbed 8.5% from a year ago to $ 304,100. Given this fact, you would think that buyers would be reluctant to pay more for a home, but that is not what has happened. In contrast, sales of existing homes on the market jumped 24.7% in July from June, reports the National Association of Realtors. This is the largest monthly gain since 1968.
Why Are Home Sales Soaring?
The reason houses sell like hell is simple: there aren’t many houses to choose from, and therefore those that do. are listed are quickly retrieved. With mortgage rates insanely low, buyers are crying out for a good deal, even if that means paying a premium for the properties they buy.
In fact, at the end of July there were only 1.5 million homes for sale, down 21.1% from the previous year. This is the lowest July supply on record since 1982.
Should you try to buy now?
With mortgage rates hitting record highs (example: the 30-year fixed mortgage has averaged around 3% for much of August), now is a good time to buy a point home. view of the loan. But if you are not in a particular rush to move, that is, your current lease is not about to expire and you do not have a job offer in another part from the country you just accepted, it might pay off to sit still and wait for the housing inventory to increase a bit.
Many potential sellers have delayed listing their homes during the COVID-19 pandemic. As this situation improves, we will likely see an increase in inventory which, in turn, will give you more choices as a buyer. Not only could this save you money on the price of your home, it will also help make sure you get the type of home you want without having to settle down.
Now you might be thinking, “If I sit there and wait six to 12 months to buy a house, won’t I miss the opportunity to get a low mortgage?” “
Maybe, but maybe not. While it is impossible to predict how mortgage rates will develop over the coming year, chances are they will remain relatively low. And in some cases, you can get away with it financially by setting a higher mortgage rate but paying a lot less for a house.
Imagine that homes in your target neighborhood cost an average of $ 300,000 right now due to limited inventory. If you are able to put in 20% funds and lock in a 30-year fixed mortgage at 3%, you will have a monthly mortgage payment of $ 1,011.85 (to be clear, this is only the principal and interest; this does not include property taxes and other monthly owner expenses).
Now imagine you wait until early 2021 and those same homes cost an average of $ 280,000. Assuming you still make a 20% down payment but the best rate you can get on a 30-year fixed loan is 3.5%, you would consider a monthly payment of $ 1,006.36 for principal and loans. interests. In this case, even if you didn’t get such a good interest rate on your mortgage, you are still paying less per month because of the drop in the price of your home.
Of course, this is just one example. However, the point is that while today’s real estate market is great for sellers, it is not so great for buyers. As such, you shouldn’t let the lure of a low mortgage rate lead you to make a buying decision that you will eventually regret.