Hoping for Lower Interest Rates? Why Waiting to Buy a Home Could Cost You
There are certain factors that determine market conditions, regardless of what's going on in the world. These are housing supply, interest rates and buyer demand.
You may wonder whether the upcoming year will bring more favorable conditions for buyers. Perhaps you're thinking it's a good idea to wait and see if factors will shift enough to make the market less competitive. Experts are advising homebuyers not to wait. There are a few reasons why doing so could end up costing you.
Interest Rates Continue to Climb
The beginning of last year saw mortgage rates hit an all-time record low. Though the following months have shown slight increases in average mortgage rates, they still remain lower than they've been in recent decades.
Issues such as continuing prevalence of Covid cases and less-than-hoped-for vaccination rates are contributing to economic uncertainties that are likely to cause interest rates to continue to climb.
Experts are in agreement that that rates could hit an average of 4.3% by the end of 2022.
That makes waiting much longer in the hopes of decreasing interest rates a poor strategy for those who are otherwise ready to make a move now.
Even an increase of half a percentage point could cost you thousands of dollars over the life of your loan. It probably best to take advantage of those lower rates now. Just think of what you could do with all of that extra money.
Supply Expected to Remain Competitive
Low housing supply has led to major bidding wars, resulting in a trend of dramatically high home prices. In many cases, sellers are getting paid even more than the house is worth.
This is bad news for buyers who may not be as financially secure or stable as others who can better afford to compete. Prospective home sellers are seeing others receive their asking price and more with ease, so the chances of price hikes ending this year are slim to none.
The pandemic has disrupted the supply chain, caused new construction to slow and boosted costs. While things may be starting to rebound, the process is a slow one.
It will probably take years for the industry to rebound. It is possible that some sellers may decide to list their homes due to the rise in selling prices they're seeing.
However, the number of listings we see may hinge on economic performance surrounding the continued Covid crisis, so this aspect remains unpredictable.
Demand Is Still High
The savage bidding wars of last year aren't coming to a halt. Therefore, those who lose out to the competition will still be looking for their dream home.
In addition, more are sure to enter the fray. These conditions are sure to play out in continuing raging demand. Remote work is becoming a standard for much of the population, so buyers are free to look in less expensive regions.
Some are considering returning to more populated urban areas. So, basically, the demand is steady throughout the nation.
All of these conditions combined lead experts to recommend that buyers who are prepared act now, rather than wishing and hoping for more favorable conditions that aren't likely to pan out.
Keep in mind that it will be in your best interest to be prepared to make at least a three to five-year commitment should you be lucky enough to score a bid on a house that fits your needs.
It will take this long for economic conditions to correct themselves in order to compensate for increased costs. You'll have some room for your home to appreciate in value and to get some payments under your belt.
Those in the know would advise you to hold off if you're not sure of your plans in the near future. Otherwise, if you are in a strong financial position and want to build roots, it may be in your best interest to act now. Waiting to buy a home could end up costing you.
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