If you are debating purchasing a home right now, you are most likely getting a lot of advice. Though your friends and family will have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Buying or selling a home is one of the biggest emotional as well as financial decisions most people make in their lifetime, and taking the time to think it through carefully before you act is always wise.
Let’s look at whether or not now is actually a good time for you to buy a home. Where should you begin? Begin by asking yourself the following 3 questions:
1. Why am I buying a home in the first place?
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances.
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 good place to raise children and for them to get a good education
A place where you and your family feel safe
More space for you and your family
Control of that space
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.
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 4.1% in 2015.
The cumulative appreciation will be 18.1% by 2019.
Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 10.5% by 2019.
So what does that really mean for you and your family?
The chart below was made using the Home Price Expectation Survey’s predictions:
If the experts are right and you were to purchase a home by January 2016 for $250,000, that home would appreciate by over $34,000 over the next four years! As we have reported before, homeownership is one of the best ways to build your family’s wealth. It creates a habit of thinking about and preparing for the future in ways that many other activities do not.
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. Although we have seen historically low interest rates for a longer period of time than many anticipated, the current rates are not likely to be available forever.
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 point over the next twelve months as you can see in the chart below:
Only you and your family will know for certain whether now is the right time to purchase a home. Answering these 3 questions will help you make that decision. And, as always, if I can be of service in some way or help you with other questions, please don't hesitate to let me know!