As March comes to a close and the final remnants of winter melt away, it's time for homebuyers to start thinking about jumping into the exciting spring housing market. Historically, spring is one of the most popular times to buy, and it's looking like this year will be no exception. In fact, Realtor.com predicted this spring will be the busiest housing market since 2006.1
Buyers will be coming out in droves this spring for a reason. It's a great time to buy. If you have been planning to purchase a home sometime within the next few years, it could be in your best financial interest to do it now.
1. Mortgage Rates are Still Low
With the December announcement that the Federal Reserve would begin to raise interest rates, many Americans feared that mortgage rates would begin to rise in 2016. Instead, the country has been shocked to see mortgage rates drop.
At the end of February, Realtor.com's Chief Economist Jonathon Smoke told the National Association of Realtors that based on the 30-year fixed-rate mortgage rate that week, buyers had about 5 percent more buying power than they did at the end of 2015.2
Keeping Current Matters, a real estate analytics company, discussed how The Mortgage Bankers Association, Freddie Mac and NAR have all predicted that mortgage rates will be higher by spring 2017.3
Purchasing a home now could lock you in to a lower mortgage rate. The longer you wait, the higher your rate may be.
2. Home Prices Will Continue to Appreciate
NAR reported that due to the small amount of inventory currently available, home prices are rising and are projected to keep on going up.
KCM discussed data from CoreLogic, who predicted that prices will appreciate 5.5 percent over the next 12 months. Using that data, KCM calculated how much a homebuyer could save by purchasing a home now versus next year when both prices and interest rates will be up:
A home today costing $250,000 at a 3.62 percent interest rate would probably cost $263, 750 at a 4.6 percent interest rate by the first quarter of 2017 (the interest rate is based on predictions by Freddie Mac). Purchasing the home now would save the buyer about $212 per month, which equates to an incredible $76,565 in savings over the 30-year life of the loan.
3. It is Still Cheaper to Buy than Rent
In November 2015, HousingWire reported that 88 percent of property managers raised their rent prices in the last year.4 Sixty-eight percent of these property managers said they would probably raise it again during 2016. Renting is becoming increasingly less affordable compared to owning.
In fact, KCM reported that in the current market, you need about 30 percent of your income to afford the median rent, whereas you only need about 15 percent of your income to afford the median home. There is no reason to help pay off your landlord's mortgage when that check could be going toward gaining equity in your own property.
You're probably thinking, that monthly payment may be cheaper, but what if I don't have enough money to cover the down payment? Well, you may be more prepared to cover one than you think. Remember, it is possible to find a loan that allows you to make only a 3 percent down payment, and if that is the case you could have enough to buy a home right now.
But Isn't it a Seller's Market?
It is true that demand is high and supply is low, but that doesn't mean you should avoid the market. What it means is you need to be extra diligent when shopping for a home. Make sure to hire a fantastic Real Estate A
gent who understands the competition in your local market, knows how to negotiate and will really fight for you.
Having a lender's mortgage pre-approval letter to show sellers is a powerful tool. You won't waste time shopping for homes out of your budget, sellers willtake your offer seriously, and you will greatly improve the likelihood of winning the bid for your new home.
Other options include getting a pre-inspection. Doing so could make you feel comfortable removing the home inspection contingency from your offer, a very appealing move from a seller's perspective. The Post also suggested expressing flexibility based on the seller's needs. If the seller wants to move quickly, be willing to move in right away, and if the seller needs more time, show that you can wait.
Research shows that homeowners are happier and healthier than renters. Why wait? Now is always the right time to invest in your happiness.
2The National Association of Realtors
3Keeping Current Matters