More people think it’s a good time to buy despite higher prices
It can be expensive to buy a home nowadays. Fortunately, rates remain low.
Plus, the national economy is strong, and employment is robust. Still, many buyers may be worried that they can’t afford a property today due to high home prices.
Actually, now may be a great time to purchase a home before home prices go even higher, many people believe. A new report from Fannie Mae suggests that Americans are more inclined to buy a home right now.
And, the Fed may cut interest rates this year.
If you decide to buy a home, you’re certainly not alone according to a new report.Verify your home buying eligibility. (Jun 1st, 2020)
Consumers remain positive about home buying
New research by Fannie Mae suggests that folks are feeling good about buying a home. That’s based on the latest monthly poll of 1,000 consumers, some of the results of which comprise Fannie Mae’s Home Purchase Sentiment Index (HPSI).
Consider the latest HPSI findings:
- The HPSI jumped 3.7 points in May to 92.0. That’s just short the survey high reached in May 2018.
- Sixty percent of consumers said it was a “good time to buy,” up 6 points from April.
- The net share of respondents who believed home prices will increase rose by 5 points to 41%.
- Those who believe mortgage rates will decrease over the next 12 months also rose 3 percentage points.
Doug Duncan, senior vice president and chief economist at Fannie Mae, welcomed most of these findings.
“Another sharp rebound in the ‘Good Time to Buy’ component lifted the HPSI nearer its survey high set during last year’s home buying season,” he said in the published report. However, he added: “While consumers’ more favorable mortgage rate outlook suggests continued support for housing affordability, potential homebuyers still face supply constraints.”
Why these numbers matter
Bruce Ailion, Realtor and property attorney, says there are good reasons why the HSPI is going up.
“There are multiple reasons for consumers feeling positive. Unemployment is at an all-time low. Average wages are rising. Interest rates are falling. And inventory is up, providing more buying choices and slowing demand pressure on prices,” says Ailion.
Indexes like the HPSI are important because they reflect consumer confidence in buying a home.
“Confidence drives home sales,” Ailion adds. “People don’t want to make long-term commitments when they are fearful of the future.”
Some would argue that the perfect time to buy is when both home prices and mortgage interest rates are low. But that doesn’t happen often; when it does, it’s probably a reflection of a poorer economy. And in a weaker economy, consumers often make less money and unemployment is higher. The fact that the job market is strong while rates remain low should at least somewhat offset the impact of high home prices.
The price of waiting for home prices or rates to fall
In fact, many believe home prices will continue to increase. All the more reason to buy now, if you can afford it and the timing is right for your situation. Waiting things out to see if rates and prices drop could lead to regret.
“I hear prospective buyers talk about timing the market and waiting for the next housing slump. There are a lot of reasons why trying to time the market doesn’t work,” says Brian Davis, director of education for SparkRental.
For example, consider that today’s prices may still be lower than eventual housing slump prices. If homes in your market go for $250,000 right now, they may rise to $300,000 over the next few years. Then, maybe they slump to a low of $275,000.
“That’s still higher than the cost to buy today,” Davis notes. “Meanwhile, in that scenario, you’ve missed out on years of owning your dream home.”
How to know if the time is right
Many factors can be in your favor to buy. Still, it’s normal to have concerns. So is it the right time to purchase?
“Home buyers should always enter the market when it’s convenient for them, given their life circumstances,” suggests Buddy Hardiman, vice president of sales for Embrace Home Loans. “Always take into consideration what fits within your budget and lifestyle.”
Ailion recommends asking yourself key questions.
“How confident are you in your job? How confident are you in your relationship? Do you have resources to handle a disruption in either? Do you have good credit? Will you qualify for the right mortgage at a desired rate? And do you plan to live in the home for at least five years?”
Consult with an experienced lender and skilled real estate agent, who can help you determine these answers.
“You need to make an honest self-assessment and buy with confidence based on facts and probabilities, not just emotions,” Ailion adds.
Check your home buying eligibility
Conditions are favorable for home buying. Rates are low and prices are still historically reasonable compared to incomes.
Check your eligibility for a home loan. You may qualify for a home, even if you thought you couldn’t.Verify your new rate (Jun 1st, 2020)