The housing market is heavily reliant on the strength of the economy at a given period of time. Because of the pandemic, mortgage rates are at a historic low, which may be spurring more people to consider buying a house now.
There are, however, more factors that you will need to consider before fully making your decision. Buying a house is a huge step, so you will want to consider all the different pros and cons of the housing market before moving forward.
This article will explain the indicators that dictate whether it is the best time to buy a house. Read on to learn more.
Why You Should Buy a House Now
There are several beneficial factors that you can tap into if you choose to buy a house now.
Mortgage Rates Will Likely Remain Low
Mortgage rates were at an all-time low in June and July of 2020, reaching 2.97%. This was a result of the uncertainty and fear surrounding the COVID-19 pandemic, which will likely remain for a while in 2021. The possible exception is if the vaccine rollouts are successful in preventing a surge in positive cases.
Freddie Mac, however, predicts that mortgage rates will remain at 3% for the rest of 2021. This is a result of expected supply and demand (that people will demand less for houses because of the financial uncertainty) and is a positive indicator for people who would like to buy a house this year.
When you’re buying something as expensive as a house, a lower interest rate will reduce the total amount you repay in the long run. It also means reducing the monthly payments you make, which can allow you to remain financially stable over time.
Working From Home May Stay for a While
The pandemic shows no signs of abating in the US, which means working from home arrangements may be here to stay – at least for the near future. Not everyone has a designated space that is conducive to productivity, which may result in more people wanting to purchase a house.
As you spend more time at home, it’s important to create a space where you can perform your work well and which will remain comfortable during scenarios where you will have to remain isolated inside.
You Can Have More Housing Options
More flexible working conditions can mean that you will feel more comfortable about moving further from the city, where you can have more housing options and can benefit from having more space for yourself. While this may be compounded with higher prices, a greater variety of options can offer you choices that you never had before.
Why You Should Not Buy a House Now
Despite the benefits of buying a house during this period of time, the uncertainty of the future as a result of the pandemic and the effectiveness of vaccines will impact the housing market. These are several reasons why buying a house now may not be a wise option.
There are Increased Complications in the Home-Buying Process
The COVID-19 pandemic has resulted in complications with the normal process of buying a house. For instance, real estate agents will be more reluctant to meet you in person and show you around the property physically. This may result in more uncertainty regarding the quality of a house or property when you consider purchasing it.
House Prices are Rising
You may be wondering: how are mortgage rates falling and house prices rising? At this period of time, there is actually a strong demand for houses due to the low mortgage rates and the increase in the number of people wanting to move to suburban or rural areas because of the pandemic.
Property prices, in fact, are projected to increase by 5.7% in 2021. While the lower mortgage rates can soften the blow, it’s important to truly calculate the overall long-term causes to determine whether it’s worth it to purchase a house now.
The housing market is currently in a seller’s market, which means that home buyers face rising prices and the market works in the seller’s favor. There is also no indication that prices will decline anytime soon. This suggests that you can experience better prices by not buying a property right now.
Your Employment Situation May Not be Certain
The pandemic has resulted in an economic downturn, which in turn may impact your job security. The unemployment rate in November 2020 was at 6.7%, and the number of long-term unemployment scenarios is increasing.
The current uncertainty can make it difficult for you to truly plan ahead. What if you buy a house and have to be laid off the next month? The stress that comes from employment uncertainty, coupled with having a new mortgage loan to pay off, will be a heavy burden for anyone.
If you are truly worried about your job security, buying a house may not be the best choice to make right now. Putting a down payment and repaying mortgage loans will have a serious impact on your savings, which you may not be able to risk at the moment.
Personal Indicators of Whether You Should Buy a House
At the end of the day, every period of time will bring both pros and cons, so the final decision will have to depend on your current state. These are some personal indicators that you should consider when deciding whether to buy a house.
Your Debt and Savings Levels
How much are you currently owing people? If you have zero (or negligible amounts) of debt, buying a house can be a good idea. It means you won’t be overwhelmed with repaying various plans and can focus your income and savings on repaying your mortgage.
The best way to clear yourself up to buy a house is to first tackle as many of your debts as you can.
Your Income Level
As a guideline, the amount you need to pay on the house in terms of property taxes, interest rates, homeowners’ insurance, down payment and principal, should be less than 20% of your take-home pay. If this is the case, it indicates that you can remain more or less financially stable after paying off these costs.
It is especially beneficial if you’ve saved up or have enough income to pay a 10% or 20% down payment. While this may seem like a hefty sum to pay upfront, it means paying less in the long-term and having to spend less time to repay your debts in the years to come.
You Can Handle Home Maintenance Costs
Buying a house isn’t cheap. What makes it even worse is the amount you have to pay every now and then to fix something in the house. Maintenance costs may seem small, but they do add up over time, especially if the house wasn’t in a great position in the first place.
When contemplating whether to buy a house, make sure to conduct a rough estimate of the amount of money you will have to spend on maintenance. Try to compare this with your income and see whether you will be able to handle repairs in addition to your monthly mortgage payment.
You Plan to Stay There for a While
Buying a house is a long-term investment. If you find a place that you absolutely love and can imagine staying in for a long time (perhaps for the next decade), then it may be worth it to purchase the house, even if not every aspect is working in your favor.
If you have been looking for a house for a while and have finally found the right one, purchasing it despite the current uncertainty may mean spending money now so you don’t spend more later. As long as you believe you can pay off the monthly payment requirements, it may be a good decision and investment choice to purchase the house.
Housing Market Indicators for Buying a House
How do you know when the housing market will work in your favor? The real estate market is heavily reliant on the state of the economy, so make sure you keep up to date with what’s going on around you. When deciding whether to buy a house, make sure you consider factors such as job certainty, mortgage rates, house prices, financial stability, and your long-term plans.
Overall, whether it would be a good idea for you to buy a house will depend on your own financial situation, and on whether you have found the right place to purchase.
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