Homebuyers are getting a lot of mixed messages this year. Interest rates are near record lows, but housing prices are still rising. So should you continue to rent or go ahead and take the plunge to buy?
That depends a lot on both your needs and where you live. You may be wanting more space for home offices, play areas for kids, and more. You may not have to be close to work, which is one reason why there’s a current exodus out of expensive cities like New York City and San Francisco to suburbs or smaller towns. Another reason is cost.
According to HomebuyingInstitute.com, home prices will almost certainly continue to rise through 2021, primarily due to limited supply and strong demand. Interestingly, the pandemic appeared to fuel the housing market. Median home listing prices rose 15.4 percent between January 2020 and January 2021. And, in the 50 largest U.S. metros homes sold 12 days faster in 2021.
At the same time, the number of homes for sale in January was down 42.6% year over year. That means 443,000 fewer homes for sale which only exacerbates demand. Mortgage interest rates hit record lows in January 2021, with nowhere to go but stay the same or go up.
You may want to take advantage of these incredibly low rates to keep your monthly mortgage payments low before housing prices rise further. Of course, talking to your lender and understanding all your costs, including the cost of the loan, whether you must pay for mortgage insurance, as well as your monthly PITI (principle, interest, taxes, and insurance), is always advisable.
Have you ever thought about what your true costs are over the life of your loan, including the total amount in interest? With rates at an all-time low, your total cost may, in fact, be the same or lower than if you were to purchase a house at a lower price with a higher interest rate. If you plan to remain in your new home for at least 8-13 years, your investment will certainly pay off.