Q: I’ve been saving up for a down payment with plans to buy a house and feel ready. But, with the real estate market hotter than ever right now, I’m wondering if I should go ahead with my purchase or push it off until the market settles down. Should I buy a house now?
A: The real estate market has been hit particularly hard by the coronavirus pandemic. Coupled with several factors, like falling interest rates, moratoriums on foreclosures or evictions and an increase in demand, prices have driven upward across the country.
According to a Zillow report published in April 2021, as many as 11% of Americans have moved since the pandemic’s outbreak, with more planning to move in the coming year. With remote work now possible in dozens of industries and the long months spent locked down in cramped apartments giving new meaning to “cabin fever,” Americans are seeking greener pastures. States that boast of a low or no property tax and an allegedly higher quality of life, like Texas and Florida, have been flooded by an influx of newcomers, as have suburbs all over the country and vacation hotspots. Homes are in such high demand, Zillow reports, that nearly half the homes up for sale in the U.S. during the month of May 2021 have sold in under a week.
Naturally, this increase in demand has led to skyrocketing prices, and many homebuyers are delaying their purchase in hopes that the market will eventually cool off. However, under certain circumstances, it can still be an excellent time to buy a house.
Let’s take a look at some reasons to buy a house now.
Interest rates are still historically low
While rates have risen since their all-time lows at the height of the pandemic, they continue to linger at record lows. On July 26, 2021, Bankrate placed the average APR* for a 30-year fixed mortgage at just 3.25%, and the average APR for a 15-year fixed mortgage at 2.62%. Many experts predict a sharp increase in rates over the next year and advise house hunters to take advantage of low rates while they last — even an increase of just 1% can translate into tens of thousands of dollars over a 30-year loan.
There are more homes on the market than you may think
While it is a seller’s market and bidding wars are the norm right now, more homeowners are putting their houses up for sale. According to Realtor.com, home sales are up by 44% compared to a year ago. Also, now that the federal moratorium on foreclosures has ended, more homes are likely to enter the market in the next few weeks and months. Finally, new construction homes, which were put on hold for months during the pandemic, are beginning to fill the market again, offering more choices for homebuyers everywhere.
It is generally the better financial choice to buy
While you’ll need to make sure you can actually afford to buy a house right now, owning a home is usually the better financial choice. Homeownership provides long-lasting equity, significant tax benefits and more stability than renting. Instead of throwing money at your landlord each month, every mortgage payment you make toward your home builds your own equity.
Before you start house hunting, make sure you are financially prepared for homeownership. Mortgage eligibility requirements can be stricter than usual now, so it’s important to bring your credit score up to 720 or higher, work on paying down debt and to save up a sufficient amount of money before you start your search so you can comfortably cover the down payment and closing costs on your new home.