If you are debating purchasing a home right now, you may be getting a lot of advice. Though your friends and family will no doubt have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Before you make that decision, let’s look at whether or not now is actually a good time for you to buy a home.
There are 3 questions you should ask before purchasing in today’s market:
1. Why am I buying a home in the first place?
This truly is the most important question to answer, and one you should give serious thought. Forget your finances for a minute. Why did you even begin to consider purchasing a home? For most people, the reason has nothing to do with finances. This is most often a heart decision, not a head decision.
A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:
A home is a good place to raise children and for them to get a good education
A home is a place where you and your family feel safe
Your own home would provide more space for you and your family
Your own home allows you control of that space
What non-financial or "heart" benefits will you and your family derive from owning a home? The answer to that question should be the driving reason behind your decision to purchase or not. I suggest you write down your reasons and keep them in front of you before, during, and after your decision-making process. They will help guide you in deciding not only when to buy, but also where and what will meet your needs.
2. Where are home values headed?
When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
Here is what the experts projected in the latest survey:
Home values will appreciate by 4.4% in 2015
The cumulative appreciation will be 19.3% by 2019
Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 11.7% by 2019
This information should be factored into your "head" decision. Does the prospect of home appreciation, particularly at the conservative or bearish level, factor appropriately into your financial plans?
3. Where are mortgage interest rates headed?
A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates.
The Mortgage Bankers Association (MBA), the National Association of Realtors andFreddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months. How will an increase, if it happens, affect your future ability to buy and your long-term ability to pay for a home? Is now a better time for you, over time, than a year or two from now?
Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision. And if I can help you by providing more information, please don't hesitate to let me know!