Throughout the COVID-19 pandemic, many people have wondered if it’s a good time to buy a house.
Let’s look at where the market is today and how that can impact your choice to buy a house or wait.
Interest Rates at Historic Lows
When considering whether it’s a good time to buy a house, experts will tell you to look towards the trends. Consider this chart, for example:
What you see here is the value of homes in Minneapolis from 2012, forecasted into 2021. There is a rise in value year over year that’s consistent. Experts believe that home values will continue to be on the rise for years to come. There’s no sign that the market will experience anything like the crash in 2008.
One of the main factors determining whether homes will continue to rise in demand and value is the 30-year mortgage rate. This year, the mortgage rate reached a low of roughly 3%. That means that homeowners can secure mortgages with less financial burdens and a better return on their investment. Some believe that it could continue to fall below 3% within 2021, making your choice to buy a home even better.
Home Prices on the Rise
As we mentioned early, home values are on the rise. Of course, if the value is on the rise, then the price is also rising. You can expect the cost of buying homes to continue to go up for as long as the market looks favorable. But, it’s important to understand what drives the prices of homes up. Like many other products, the driving factor behind home prices is demand. When there’s a high demand for homes, then there is equally a higher-price for homes. Realtors and real estate agents determine market demand by watching how long homes stay on the market before selling.
Let’s look at our home state of Minnesota. In Minnesota, the best time to sell a house is during the summer months when the weather is warm, and homebuyers won’t have to worry about moving their stuff in the cold. For that reason, the summer months, especially June, are the best months to sell a house. According to this article, the median amount of time a house is on the market before receiving an offer is roughly 35 days. After that, you can expect another 35 days to finish the closing.
The Challenges of Buying a Home in 2020/2021
Despite there being many great reasons to purchase a home in 2020 and 2021, some big challenges should be considered. One of the biggest challenges that home buyers are facing is a lack of inventory to choose from. Because houses are selling so fast and there aren’t as many on the market, it can be difficult to find the right home, in the right area, for the right price. Here are a few scenarios if you’re looking to move into a new home.
Be Open to Moving Across State Lines
Finding the right location for your home can be difficult. While it’s great if you can get a home in the city that you’ve always wanted to live in, finding that home might be difficult at this point. To find the right home, consider moving to another state, county, or city. If you have kids moving might not be as easy, but with so many jobs going remote and many more companies hiring, there’s a good chance that you can find work in a new place if you need to. In this scenario, you’ll have to choose if your home or your location is more important.
Consider Purchasing a Home that Needs Some Work
If you love the area you live in and don’t mind having to put a little work into a house, consider finding a fixer-upper. A fixer-upper home refers to move-in ready home, but that’s rough around the edges and could use some work. If you’re willing to do some of the work yourself or undergo a remodel project with a company like Sustainable 9, then this scenario could work out perfectly.
Determine What Features Your New Home Must Have
Along the same lines of choosing a fixer-upper is determining what features your new home must-have. Be making a list of features you want in a house you can help narrow the search and hopefully find a house that meets all of your dreams and then some!
A Sellers Market
Something you may have heard time and time again from experts and realtors in recent months is that today’s housing market is a seller’s market. While yes, the market is very well established for those choosing to sell homes instead of buy homes, where will you move to after you sell your home? Even in a seller’s market, some ask if it’s smart to buy homes and what we’re finding is that it depends on the size of home you’re looking for.
The Right Homes to Buy
If you’re a newly married couple, a young family, or someone just starting on their own, then you might want to wait before buying a home. According to Forbes.com, the real estate market is far too good to be true currently. While it’s a great time for longtime homeowners to cash out on their investment, first-time homebuyers are in a tough position when considering to purchase a home for $310,000. That’s an extremely high price for a first home.
On the other side of things, those looking to upgrade and move into a larger house might be able to find a deal or two. Many of the homes that are quickly selling these days are small to midsized houses. That leaves out larger homes selling but can sometimes take a few more months for the right buyer to find them. As we talked about before, the longer a home is on the market, the more likely it is to go for a lower price.
The Right Time to Buy
Many factors will affect the prices of homes in the future. The stock market, 30 year fixed mortgage rates, and much more. To effectively determine when to buy a house, use this checklist, and ask yourself these questions.
- Do I have a down payment?
- Can I afford the monthly cost of a mortgage?
- Can I afford the closing costs and costs of moving?
- Do I have a high enough credit score for a loan?
- Will I be able to sell this house for the price I paid or higher in the future?
Talk through these questions with a realtor or financial advisor to ensure that you’re answering them the right way and making a good decision. Buying a house is a big decision and requires you to make smart and informed decisions.