We know the housing market is crazy right now and that has not stopped homebuyers. According to the National Association of Realtors, more homes were bought in 2020 than any year since 2006. So should you buy that dream home now? Or should you wait?
For those thinking about buying in 2021, there are some that feel everything is bad news (rising prices, falling affordability, etc) but there are some perks to buying now. The biggest perk is low interest rates! According to Freddie Mac, interest rates on 30 year loans averaged 2.96% in May 2021, two years ago that same interest rate was over 4%!! Economists are expecting rates to keep rising this year and next. We could be above 3.25 -3.5% by the end of the year.
To give you an idea of what the savings are on the mortgage payment now vs forecasted rates – a payment on a loan amount of $320,000 at 2.96% for principal and interest only is $1340, with rates at 3.5%, that same payment would be $1440! That means you save $100/month now compared with two years ago. Rates do vary but this gives you an idea of the payment could be.
Rising home values also give you more equity. Prices have increased in the past year so anyone that bought in the last few years have gain equity. Buying now means that you can capitalize on this growth in the next year and build your equity faster. Maybe you will need to put less money down and pay mortgage insurance but that’s not always a bad thing. PMI on conventional loans will go away once you have enough equity in your home.
So what are the drawbacks to buying a home in 2021? The biggest issue has been inventory! I have heard that inventory is increasing, so that will help those looking at buying this summer and fall. For now, it’s been an issue and for many it’s been frustrating as they have to look at homes the minute they come on the market and decide if they want to write an offer immediately! That can be difficult.
Another drawback has been cash buyers. For those getting a mortgage to buy a home, a cash offer is usually taken over a mortgage. That can be frustrating but I have had buyers get their offer accepted over a cash offer. Hang in there!
Mortgage lenders have tightened lending standards for homebuyers during the conoravirus pandemic. These standards are beginning to loosen up. Sellers are also less likely to want to accept an FHA or VA offer, which has made it harder for some buyers.
So what should you do? The best decision depends on your budget and your patience! For many clients that have been frustrated and thought about waiting to buy, I have talked to them about being patient and holding on! Homes are coming on the market and it sounds like instead of seeing 10-20+ offers on a home, realtors are seeing 2-5 offers – that may help you get a home now. It may be that other buyers have decided to wait and that can help you. As you wait to get a home, try to continue to save money. That can help you when you do get your offer accepted, plus it may allow you to write a better offer! Talk to your loan officer and realtor and decide what you want to do. It may make sense to keep trying to buy and know that it may take time to get an offer accepted. The best solution – have patience!!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website