Six Reasons Why Now is the Perfect Time to Buy a Home
If you’ve been contemplating home ownership, are a first-time buyer, or are even thinking of selling your old home and purchasing a new one, economists across the board agree that now is the perfect time to purchase a home. With rents rising at an ever-increasing rate, it’s making more and more economic sense for first-time buyers to finally pull the trigger and invest in a home, and even if that weren’t the case, the current conditions of the market are especially conducive to buying a home, rent increases notwithstanding.
As we’ve seen, construction of new homes is at an all-time high since the financial crisis of 2008, and the housing market has never been more robust in the ensuing years. It’s safe to say that while wage growth has been a little slow, the housing market is in full recovery mode and poised to come roaring back. As we discussed in our last blog, not only are prices rising by an average of 3.5% per year, some areas, such as Denver and Seattle are positively booming, boasting value increases of up to 5% in 2015 which are projected to continue well into 2017. Regardless of your location, it’s safe to say that with a little bit of effort and research you too can find a home worth buying that will increase in value as the years progress, and this is true for both first-time homeowners and real estate investors alike.
Markets are complicated entities, and there are a great deal of factors that determine their health and correlation between the various components within them. The housing market, while not intimately tied to, say, the stock market, is nonetheless as integral a part of the economy as the job market, manufacturing, and energy prices, and all of these things can and do affect the motions of real estate.
The Job Market is Strong
In the last 12 months, we’ve seen 2.65 million new jobs created. Unemployment is low and wages are finally starting to rise, indicating that employers are facing more competition when hiring and seeking to hire the best and most dependable workers. We’ve also seen an increase in the rate at which people leave jobs – for career changes or school, or for other employment – indicating that job seekers are increasingly confident in the market and in their chances of finding work. With industries like leisure and hospitality experiencing rapid growth, it’s clear that consumer confidence is high as well, which is a natural consequence of a strong job market. A strong job market means that home construction increases, which increases the supply of both new homes and existing properties (the latter as people sell their old homes to move into new ones) slightly ahead of the increase in demand.
Interest Rates Are Low
Interest rates are hovering around 4 percent, which is astoundingly low and makes buying a home more affordable than ever. While this is certainly helpful for the first-time buyer, it also benefits current mortgage holders who have no intention of leaving their current home. If you have an interest rate above 4 percent and plan on being in your home for five years or more, consider refinancing for a better deal. Shop around, call local lenders, and if possible consider a 15-year mortgage rather than a 30-year.
Property Values Are Rising
As we’ve already noted, property values increased by anywhere from 3.5 to 5.1 percent last year. This means that anyone who bought a home a year ago effectively got his or her first year of ownership for free based on the increase in its value. That’s a big deal because, whether you’re an investor or a homeowner, you actually increase the return on your investment as a matter of course based on property value increases all across the board as opposed to picking an area poised to experience growth. If you’re an investor, pay attention to these trends and formulate them into your overall plan. If you’re a first-time buyer, remember that the quicker you buy a home in these conditions means that you can purchase more property with less money before prices increase further and continue their upward trend.
Rents Are Rising
As rent rises, it provides incentive for the average renter to consider buying a home. If you’re currently renting, you should consider that you may very well pay less for a mortgage and build equity in a home at the same time as opposed to paying by the month just for a roof over your head. If you’re an investor looking to hold a property for a few years while prices rise, inflated rents may mean you can knock yours down a bit in order to be competitive and attract good, reliable tenants while your property value appreciates.
Fuel Costs Are Down
At the core, lower energy prices, particularly gasoline, mean that consumers have more income to spend on a mortgage. Oil prices are expected to stay low for quite some time, and therefore consumers feel confident in spending the extra discretionary income they find in their wallets. For the current or future homeowner, however, lower energy prices can also mean lower heating costs in the winter due to cheap oil, and oil prices in general are typically reflected across the board with energy costs such as electricity as well as staples such as food due to lower transportation costs.
Technology Is Making Real Estate Transactions Cheaper
Finally, technology, especially the Internet, makes the process of finding properties, buyers, and agents a lot less time consuming, and in this business time is money. Consumers now have more choices than ever when it comes to selecting a home, and sellers can rely on databases to ensure potential buyers see their properties alongside others as they shop around. Even cell phones, while not a particularly recent invention, shave precious hours off the process of connecting with agents, clients, or buyers. More recently, the advent of smartphones and 24/7 email access means that transactions and negotiations can be conducted much more quickly, and this is reflected in the ease with which properties are bought and sold. If you’re looking to buy a house, there’s never been a better time than now, when sellers or agents are able to manage several potential sales at a time and therefore may be more willing to negotiate down on their asking price.
In this market climate, the quicker you buy a home, the more benefits you’ll reap. Much like planting a tree, the faster you plant it, the quicker it will grow. It’s important whether you’re a first-time homebuyer or an investor to be aware of market conditions that are beneficial to you, and right now, there’s never been a better time to purchase property. Be sure to check back with us each week for more advice on purchasing real estate and tools of the trade regarding real estate investment, and don’t forget to follow us on Twitter and Facebook!
– Get It Right Solutions LLC