Adapted from our friends at Keeping Current Matters.
1. Prices are increasing at an accelerated rate.
The price of a home is the major consideration when deciding whether or not it makes financial sense to purchase a house. Experts are not only projecting that house values will increase in 2013. They are also more optimistic in the level of appreciation they are projecting as the market begins to heat up. Here are two great examples from the experts.
The Home Price Expectation Survey, the latest survey of a nationwide panel of 118 economists, real estate experts and investment and market strategists, reveals they project home values to end 2013 up an average of 4.6% according to the first quarter. This is after they had projected a 3.1% increase just three months ago.
In a report titled, Someone Say House Party?, Bank of America analysts revised their projections upward:
“Home prices continue to show momentum amid shrinking inventory and record high affordability, prompting us to revise up our original forecast of 4.7% for home prices this year. We now expect national home prices, as defined by the S&P Case Shiller home price index, to increase by 8% this year.”
Not only are prices projected to appreciate. Experts are actually revising their projections upward as demand maintains its momentum.
2. Interest rates are increasing.
A big component in the cost of a home is the mortgage interest rate a purchaser pays. Understanding where rates are headed will help in making a decision whether to buy now or wait. So where are rates headed?
No one can know for sure. The Fed has been artificially holding rates down to stimulate the economy. However, as the economy improves, many experts expect rates to creep up.
The Mortgage Bankers Association (MBA) agrees. They were quoted in HousingWire late last year regarding their thoughts on where rates would be headed in 2013.
“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association predicted.”
As we mentioned, no one knows for sure where rates will be a year from now. But, many experts think they may be as much as a point higher.
3. Rents are skyrocketing.
Whether you own or rent, you will have a monthly housing expense. The question is how that expense will change in the future. When you purchase a home, for the most part, you lock-in that monthly housing expense for the length of the mortgage you take (15 or 30 years for example). When you rent a home, your housing expense is impacted by movements in the supply and demand for rental properties.
Historically, residential rental rates increase by 3.2% on an annual basis. However, in the current housing environment, there is an increasing demand for residential rental properties. This increase in demand has dramatically impacted rates. Zillow, in their most recent report, revealed that rental rates in the U.S. increased by 4.5% over the last twelve months. Other studies have projected rental rate increases of 4-5% over the next few years.
The only way to have control of your housing expense is to buy.
But isn’t buying much more expensive than renting? Not right now! As a matter of fact, with prices down and mortgage rates at historic lows, it is less expensive to buy than rent in most areas. In a recent report, Trulia revealed it is cheaper to buy than rent in ALL of America’s largest regions.
According to Jed Kolko, Trulia’s Chief Economist:
“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat. Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets.”
Again, the only way to lock-in your monthly housing expense is to take that decision out of the hands of a landlord by owning. With both prices and interest rates set to increase, the best time to buy is right now.
Given these three financial factors, now is the time to buy. If you’re interested in buying or selling, contact a Shorewest agent to get started today.