One of the ever-present questions in real estate is “is now the right time to buy?” There are so many variables that people can look at. Some will confidently support “no” while others will champion “yes”. So how to make that decision on if it’s the right time to buy? Ultimately, it’s a personal decision, but there are some sold financing points that are worth taking a look at in order to make a well-informed decision.
Interest Rates Are Going Up – I Need to Buy!
Yes, interest rates are going up. From our historic low rates in the 3’s, rates have crept back up into the mid-4’s and are projected by Freddie Mac to hit the low-5’s by late-2019. When you compare this to the rates over the last few years, it feels significant and a bit of a bitter pill.
But let’s put this in context. Over the last 40 years, rates have been up as high as in the 12+% range. Our projected rates of the low-5’s starting next year is still at a decades low rate and continues to make it an excellent time to buy real estate.
Interest Rate Increases Don’t Impact Buying Power That Much
While rates are still on the historically low end, and will continue to be for at least the next year or two, their increase does have a direct impact on buying power and timing.
This great infographic lays out the ramifications of waiting a year to buy that new home. With the anticipated increase in rates, you can see what funds and savings would be lost over time versus if you bought now. Keep in mind, and this is huge, this chart is based on a home price of $250,000. Here on the Peninsula, an entry level house is likely $1-1.5M, so multiply the output/savings accordingly. You can see how, especially in our market, that interest increase means a LOT more money out of pocket over time.
So How Do I Know If It’s The Right Time to Buy?
As I mentioned earlier, the answer to this question is ultimately a personal one. But from an interest perspective, while rates are still relatively low, their expected increase will have a long term impact on buyers. This makes now a better time to buy from that perspective than a year or more from now.
On the personal front, ask yourself a few questions:
- Do I have (or can I get,) enough for a down payment?
- Do I know what I’m looking for and what I can afford?
- Do I have the financial stability to qualify for a loan and to make myself feel comfortable with making mortgage payments for years to come?
If you answer “yes” to all of these questions, you are ready to start searching for your new home! Answering “no” to any one will give you insight into the areas you still need to work on. But keep in mind, the longer you wait to make the leap into home ownership, the more significant interest rate levels will become in your decision making.
IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.
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