Buy a Home Now or Wait until 2018?
The idea of buying a home is a debatable topic topic for many people. You have heard the real estate market is hot and wonder if buying is a good idea. Coming to a conclusion, however, takes time, thought and careful consideration. To help make the decision to buy a home in 2017 or wait until 2018, we offer the following advice, including both pros and cons.
Pros for Buying a Home in 2017
Interest Rates are Still at Near Record Lows, but are Starting to Rise
According to Freddie Mac, at of the time of this article the average 30-year interest rate for home buyers is 4.25 percent. The same rate was 3.69 percent at the same time last year. Rates hit their lowest at the end of 2012 when they were 3.3 percent. Are you seeing the trend?
Two industry experts predict rates will continue rising throughout 2017. The Mortgage Bankers Association expects a 30-year fixed-rate mortgage to be 4.7 percent in the fourth quarter of 2017. Similarly, the National Association of Realtors anticipates that the 30-year fixed rate to be around 4.6 percent by end of year.
What does this mean for you? A one percent increase means you pay an extra $1000/year or $83 per month for each $100,000 you finance. To put that into perspective, at 4.25% a $100,000 mortgage payment over a 30-year period will be approximately $492 before taxes and insurance are factored into the payment. If rates rise to 4.7, percent the payment increases to $518.
Prices are also Rising, and Waiting Longer Might Hurt Affordability
Prices are predicted to increase for the foreseeable future so procrastinating might also cost you. In February of 2017, the median sales price in Central Ohio was $161,900, which is a 5.1 percent increase over February 2016. Let’s put that in terms of how much you pay monthly. If you bought a home priced at the median in 2016 ($153,805) and put 10 percent down (financed $138,425 over 30 years), your payment before taxes and insurance would be $718. The same home in February 2017 would cost $788 per month. If prices rise another 5% and you wait another year, the price of the home will increase to $169,995 and your payment will be $830. In short, the amount of home you can afford shrinks the longer you wait.
Inventory is Shrinking
There are fewer than 4,000 homes for sale in all of Central Ohio. Many in the industry have waited for more sellers to put their home on the market, and generally speaking, that has not come to fruition. Instead, the months supply of inventory has consistently decreased. Months of supply is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. In February 2017 the months of supply is 1.6, which means it would take that long to sell the listed inventory at the current pace. Last year, it was 2.1. The lower the number the worse it is for buyers. If the trend continues, competition will be steeper and that means higher prices and even less affordability.
Cons for Buying a Home in 2017
As we just mentioned, the number of Central Ohio homes for sale is at a record low. With less than than 4000 homes listed in the MLS (including Franklin, Delaware, Fayette, Licking, Madison, Morrow, Pickaway and Union Counties, as well as parts of Athens, Champaign, Clark, Clinton, Fairfield, Hocking, Knox, Logan, Marion, Muskingum, Perry and Ross Counties), buyers are having to compete for those homes listed for sale in our the market. As a result, the seller holds negotiating power and multiple offers on a home is the rule rather than the exception. This is a drastically different scenario than what we saw in 2008 and the following few years. Many buyers learn this the hard way by trying to over negotiate price and terms and lose out to other buyers who presented a stronger offer. If you are prepared and have a skilled real estate agent, however, this is an obstacle that one can overcome.
The decision to buy a home in 2017 is highly personal. In addition to the factors listed, you should also consider financial and personal reasons. If you are overwhelmed with the decision, it is a good idea to consult with friends, family members and/or a trusted real estate agent and mortgage professional. If you would like to learn more, contact the Realtors at 43 Homes.