The Common Misconception About Buying
At the beginning of 2019, the country was faced with a government shutdown and a stock market decline. The real estate inventory started out a little high. Buyers quickly came out of the cracks and into the market and erased the higher inventory. In fact, available housing inventory became too low and continues to be low. Then, interest rates started to decline and home sales and prices started to increase.
Flash forward to the present, November 2020, prices are increasing in most of the country and are expected to continue to rise this year. Some people are afraid to purchase homes when real estate values are increasing. They believe that home ownership isn’t affordable or a smart investment. This is the number one misconception about buying a house in today’s market.
Historically Low Interest Rates
Buying a home at today’s prices is actually a very smart idea. This year the real estate market is celebrating with historically low interest rates. They are almost one percent lower than in the early spring of last year. Even though the home prices have increased, a monthly mortgage payment may be even lower than it was last year for many people. So if you are getting a fixed-rate mortgage to purchase a home, it’s actually a great time to invest.
Income Levels are Rising
Unemployment rates are low and income levels are rising for many people. The median family income rose by over 5% in 2019. This means more people will be able to qualify for homeownership this year. The largest majority of millennials are turning 30 this year. They have spent their twenties paying off student loans and other debt. Many of them have secured employment and have been saving to buy a home. As millennials and future generations age, home ownership is going to be a priority if the interest rates stay low and they are able to purchase a home.
Home Prices are Slowly Rising
The good news is that even though home prices are rising, they are rising slowly. This is unlike the real estate market before the crash in 2008. Before the crash, home prices were rising at exorbitant rates. The real estate industry calls this a real estate bubble. The crash was the bubble popping. Buyers today don’t have to worry about a bubble popping or the market crashing. Everything is cyclical. Real estate prices increase some years and decrease in other years. Overall, real estate is a smart investment.
If you’re buying a home in today’s market just try to be smart. In purchasing a home, you don’t pay for a real estate agent’s services, so use a Realtor to maximize your home buying power. Talk to your mortgage lender about getting the lowest interest rate possible. Try to put down as much of a down payment as you can so you have instant equity in your home. Ask them for a good faith estimate to ensure your closing costs are affordable and taken into account. Don’t be afraid to ask for discounts on closing costs. Buy within your comfort range. Don’t purchase a home that is too expensive and will make you house poor so you won’t have any money for discretionary spending. If you are purchasing a home in 2020, congratulations.
