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Is Now a Good Time to Buy a House?

Real estate prices went up in 2021 with over a 16.9% increment from 2020. According to the National Association of Realtors, this escalation was the highest since 1999. Zillow also predicts a continuous increase in 2022 and a 17.3% increment by January 2023.

Besides this housing price increment, home inventory is dwindling, meaning buyers might have to pay more to own a home. Therefore, with growing home prices and low inventory, many potential buyers might wonder, is now a good time to buy a house?

The recent Fannie Mae survey shows that many consumers might postpone buying a house in 2022. More than 60% of the survey respondents predict higher mortgage rates. More so, there are rising concerns about escalating house prices and job stability.

Suppose you’re wondering, is now a good time to buy a house? The answer is quite complicated. This article explores reasons to buy a house now and whether now is the best time to become a new homeowner. Keep reading!

Should You Buy a House Now?

The reality is that there’s never an ideal time to buy a home. Even in a buyers’ market, buying a home is still tasking. Hence, the decision to buy a home should be peculiar to your situation.

Your credit score, down payment amount, and budget all play a significant role in whether you can buy a house. Therefore, to decide if buying a house now is a great plan, look at your personal finance and your preferred area’s current home prices.

Suppose your calculated mortgage payment is less than or the same as your monthly rent and you’ve saved money for a downpayment. In that case, you might want to consider buying now. Besides your down payment and other financial factors, you also need to check home prices and inflation, current mortgage interest rates, and market trends.

Sometimes, market conditions make it difficult for homebuyers to buy a house. For instance, some people became homeowners in 2021 due to the interest rates reaching a historic low, leading to housing affordability.

Unfortunately, the Federal Reserve is increasing rates to control the rising inflation. The three percent interest rate has increased to five to six percent, raising the cost of borrowing by thousands of dollars.

Market conditions also contribute to whether it’s best to buy a house now. We are currently in a sellers’ market, meaning more buyers and fewer available homes for sale. Due to the few homes available for sale, there’s increased competition considering that more buyers are bidding for the same properties. This competition will lead to higher bids and increased property prices.

Regardless of the unfavorable conditions, the right time to buy a house will depend on your financial situation. Therefore, ensure you check current home prices in your preferred location and assess your financial capacity to decide if you’ve said enough for monthly payments.

2022 Current Market Conditions

The market conditions are beginning to change, making it easier for some prospective buyers and difficult for others. Here are some primary features of the current market conditions.

A newly purchased house in a beautiful neighborhood

  • Higher Interest Rates

Again, interest rates reached a historic low in 2021, making a home purchase an attractive option for more prospective buyers. Presently, there are rising interest rates to combat inflation.

Hearing about the high-interest rates as a borrower is not welcome news as a rising rate means an increased monthly payment.

  • Increasing Housing Costs

The escalating housing prices might continue all through 2022, leading to the inability of some potential homebuyers to purchase a house. Although, the prices might increase more slowly than they did last year.

  • It’s a Seller’s Market

Presently, there are fewer homes and more buyers, making the industry a seller’s market. However, the number of available houses for sale might increase before the year runs out. That way, buyers can find properties they like.

  • Homes Are Selling Quickly

There has been an increased rate of home sales these past few years, impacting potential buyers. Therefore, buyers might need to offer higher prices or compromise during negotiations to stand out from other bidders.

It’d be best to consider your budget before looking for homes to enable you to know what to afford.

Reasons to Buy a Home in 2022

Despite the market condition and all the pessimism that comes with it, buying a home in 2022 could be a great move for some reasons. For instance, a pre-approval will help you lock in interest rates before it keeps skyrocketing. You might want to act quickly now that the market conditions are still favorable and properties have become more expensive.

However, ensure you do adequate research before proceeding with your plan. You might discover from your calculations and analysis that your estimated monthly mortgage payments will be lower than your current rent.

Here’s why you need to consider buying a home in 2022:

  1. Extra 22 Points to the New Credit Score System

One reason to buy a house now is that on 1st July 2022, the US credit bureau stopped adding medical collections and debts in their credit scoring formula. They’ve removed satisfied medical deficits from your credit report, and your unpaid medical collections won’t be recognized after one year.

Any outstanding medical collection below $500 will be ignored in 2023 and beyond. According to the Consumer Financial Protection Bureau (CFPB) estimation, the average homebuyer’s credit score will increase by 22 points.

Also, about 23 million intending homeowners will benefit from the change. A higher credit score will lead to greater home affordability, lower down payments, and reduced mortgage rates.

  1. Sellers Are Lowering Their Price

Sellers are starting to lower their prices since July compared to the high rate of home prices witnessed in the first half of the year. Now is a good time to purchase a home due to the low property costs.

In July alone, over 30% of sellers reduced their price from the original listing amount. According to Alto Research, the housing market is witnessing price reductions, and July’s price cut matches historical trends and keeps increasing.

Home sellers are starting to understand that the buyers won’t go for over-priced homes. For the first time this year, the buyers are taking charge of housing prices.

There's a high number of properties for sale

  1. High Number of Homes for Sale Across the Country

You might want to make hay while the sun shines because many homes are available, but fewer buyers are bidding for them. The Federal Reserve reported that more properties are for sale in the US than what has been obtainable since this year.

NAR also reports that the number of active buyers has reduced in the last few months. At this current sales pace, experts project that the national inventory might sell out within 11 weeks, a 62% rise from the first half of the year.

Since there are more available properties than buyers, sellers are getting nervous and have begun to lower their prices, making it a great time to buy a house.

Factors to Help Determine If Purchasing a Home Now is the Best Idea

Buying a house depends on your unique financial situation. If you’re still trying to decide if now is the best time to become a new homeowner, the following factors will help you make the best decision:

  • Financial Stability

Undoubtedly, purchasing a house is a substantial financial commitment. Hence, it’d help if you were prepared financially before making any decision. Start with your finances and decide the amount you’re willing to spend on a house. Don’t forget to factor in mortgage payments, home inspection, closing costs, and the down payment.

You might want to make a budget for saving for the necessary costs. That way, you can control your expenses and save money for a down payment.

You can also set up auto savings to automatically allow contributions into your house fund once your salary drops into your account. Visit your financial institution or bank to help you set it up.

  • Local Housing Market Trends

It’d be best to monitor the new housing market trends before purchasing a house. If there’s a current upward trend, you might have to hold on and wait for when the home price growth is on a downward curve.

Don’t forget to monitor the housing inventory to discover whether you are in a seller’s or buyers’ market. It’s always best to purchase a house in a buyer’s market since more homes are sold with less competition. A seller’s market is the opposite of a buyers’ market, with less inventory and more buyers, leading to competitive bidding.

  • Mortgage Lender Requirements

The mortgage industry has loosened its lending requirements since 2021; some lending services still attach relatively strict requirements before loan approval. Therefore, you might want to ensure your mortgage qualifications, like your debt-to-income ratio (DTI) and credit score, are in order before starting your home purchase process.

You’ll need a 620 credit score to qualify for conventional loans. Nevertheless, you can be eligible for an FHA mortgage with a 10% downpayment and a 500 credit score. You’ll also need less than 50% DTI to qualify for most mortgages.

The lower your DTI, the higher your chances of appealing to the lender. Your DTI indicates the percentage points of your salary or wages for debt repayment and bills. It’d be best to have some money saved for closing costs and down payment.

You’ll need 20% of the home value or more if you don’t intend to pay private mortgage insurance (PMI). Closing costs are often three to six percent of the total loan amount. Therefore, ensure you save enough money to become eligible for the loan.

Your readiness to buy a house determines if now is the best time for a home purchase

  • Readiness to Buy

The best time to buy a home is when you’re ready and can afford the purchase. It’d help if you were sure you’d live in the house for a long time to ensure your home value has increased and is higher before selling the property and purchasing a new one.

Also, consider the real estate commission and closing costs when reviewing the numbers. Seeing as buying a new home is a lengthy commitment, you need to evaluate your job stability.

Are you financially stable enough to pay for the costs and expenses of buying a property? Will your income be enough to cater to the mortgage repayments? These are questions you need to answer to determine your readiness.

How to Become a Homeowner With No Down Payment in 2022

Although making a 20% down payment is one of the steps to buying a home, you might be shocked to realize that you don’t necessarily need a down payment to become a homeowner. First-time homebuyers can access seven low down payment options, including two home loans requiring no down payment.

Grant programs and tax credits can help you achieve your American dream of becoming a homeowner. Also, some lending services like Rocket Mortgage offer down payment assistance to first-time buyers, including a forgivable down payment loan to enable them to buy their home without a down payment. However, it depends on their credit scores.

A typical first-time buyer might take up to a decade of college savings to get the 20% downpayment. You might make the dream come faster than you think when you use the no or low downpayment loan.

Why You Shouldn’t Buy a House Now

Until this July, the market was so competitive, and home prices escalated, making it expensive and difficult for most buyers. The high home values further lead to more competition, driving the prices up.

Thus, homeowners might have to make an offer stand out by paying in cash or waiving some contingencies to win the bidding war on their preferred property. Therefore, it’s best to monitor the current market conditions and the inventory, especially now that fewer buyers are competing for available properties and sellers are starting to lower their prices.

You might want to monitor the market for a while before making your purchase to see if the listing prices will continue to drop. The current market is unfavorable to existing homeowners who want to buy their next home while their current one is in the market.

Their mortgages might have low-interest rates that would be difficult to see in the current market, causing them to exponentially increase their monthly expenses when they buy the new house.

Suppose you aren’t in a hurry to become a new homeowner; it’d be best to wait a while. Better rates and prices might come up soon. However, there’s no guarantee to these things; the rate might decide to go up due to market conditions. So, take your time to determine your best course of action.

Rising rates affect home affordability

The Bottom Line

Buying a house is a significant accomplishment and a long-term financial investment. Before signing a loan, you need to consider some factors, including your budget. Decide your preferred location and review your job security, finances, and future goals.

Don’t forget to check the current interest rates and industry trends. Ensure the home you end up with is one whose property value will increase with time just in case you decide to sell it in the future.

If you’ve been asking, is it a good time to buy a house? There’s no best time to purchase a home; the right time depends on the potential buyer and how financially prepared they are. Hence, it’s crucial to consider your finances and how monthly mortgage repayments will affect you.

To ensure you make the best decision regarding your home purchase and buy your dream home at the best price, consider working with an experienced real estate agent. At Real Estate Informations, our team of licensed and professional real estate agents will help you find your dream home at the best time while considering the current market trend and the budget.