This guide covers when the right time to buy a home with high mortgage rates, skyrocketing home prices, and soaring inflation. Many wonder when the right time to buy a home is. Home prices have been rising for the past three years. Due to rising home prices, HUD and the Federal Housing Finance Agency have increased FHA and Conventional Loan Limits. Due to skyrocketing home prices, the FHFA and HUD have increased home prices for the past seven consecutive years, says John Strange of Gustan Cho Associates:
FHA Loan Limits for 2023 are now capped at $472,030. Conventional Loan Limits for 2023 are now capped at $726,200. President Donald Trump has signed a bill eliminating maximum VA Loan Limits on VA loans starting January 1st, 2020. Many veterans cannot purchase a home that suits their needs due to high prices.
Many homebuyers are leaving states with higher home prices and relocating to states with affordable housing. Record-high mortgage rates, escalating home prices, and soaring inflation fuel more homebuyers in an already low-inventory housing market. In this article, we will discuss when the right time to buy a home while home prices are skyrocketing, rates are high, and inflation is soaring.
Is 2023 The Right Time To Buy a Home With Record High Mortgage Rates
When is the right time to buy a home? Many would-be homebuyers have waited for a real estate market correction. However, home prices have increased in the past seven years with no sign of a correction. To confuse homebuyers, mortgage rates have dropped significantly since the start of 2019 and now are at a 20-year high.
So many conflicting reports are in the news about a potential pending recession. The economy has been great for quite some time—fears of inflation concern many taxpayers. Talks of Trump’s trade war with China and other nations are often causing alarms on whether it will affect jobs.
The pending 2020 election is causing uncertainty if President Trump is not elected. Recent talks of the impeachment of President Trump are also another concern. Why do all these concerns affect homebuyers? This is because a home is one’s biggest and most important investment. Average home prices are $297,900. Many folks who went through the 2008 Great Recession do not want a repeat of another financial disaster.
Where Are Mortgage Rates Headed?
The Federal Reserve Board has decreased interest rates for several years. However, rates started to shoot up starting in early 2021 and now is over 7.0%. In 2019 and 2020, the Feds lowered rates for the first time since the 2007 Great Recession. Lower interest rates by the Feds normally mean lower mortgage rates. However, rates have done a complete 180. Inflation is out of control and so are rates. Today, mortgage rates are at the highest levels since 20 years ago. Average par rates on a 30-year fixed-rate mortgage are at 7.5%.
Just a year ago, rates were at 4.75%. Nobody has a crystal ball and cannot predict where mortgage rates will go. In the last news release of the Feds lowering interest rates by 25 basis points, mortgage rates went up sharply. Why is it? Isn’t lower interest rates by the Feds mean lower mortgage rates? In general, the answer is yes.
The Fed’s announcement was mixed. Some members said they want another rate increase before year-end, while others stated no more interest rate cuts until next year. And next year’s potential rate cut was a maybe. With this news, mortgage rates went up sharply. Rates are now higher than 7%, which has put a dent in the buying power of many homebuyers. This increase in mortgage rates after the Feds announced they cut rates by 25 basis points confused homebuyers. Many are in a dilemma and do not know which direction to go. The consensus by experts is to go ahead and purchase a home today because it is the right time to buy a home.
The Right Time To Buy A Home Is When The Homebuyer Is Financially Ready And Stable
Most agree that a home is the best investment one can make. For renters, there is never a wrong time to buy a home. Homeownership benefits renters in more ways than one. Homeowners benefit from real estate appreciation, where they can gain equity over time by combining appreciation and paying down the mortgage.
Homeowners get to deduct mortgage interest from their income tax returns. Renters do not have that luxury. Many homeowners who purchased a home in the past five years have tens of thousands in equity due to appreciating home prices.
The right time to buy a home is not when rates are low, home prices are low, or whether or not it is a great investment. These are great factors to take into consideration. However, the bottom line is the right time to buy a home is when the homebuyer is financially ready, able, and secure. With soaring rates and inflation out of control, a home purchase today is your best investment.
Considerations Before Pulling Trigger In Buying A Home
The right time to buy a home is when the buyer can take the following considerations and see if they are ready to become a homeowner: Is your job stable? Is your industry stable where you could easily get another job if you were to lose your job? How much home can you afford versus qualify?
You do not want to live paycheck to paycheck, where most of your monthly income goes towards your home mortgage. Do you have the down payment or closing costs for a home purchase? How far are you willing to drive to and from work? Are you planning on staying in your home for at least five years?
Will your job require a job transfer to another state or a branch location where it is beyond driving distance? Are you planning on having a family? Those planning a family should consider a single-family home purchase versus a condominium. The above factors should be considered seriously when deciding when to buy a home is the right time.
Today’s Housing Market
Homebuyers should take today’s housing market into consideration. Homebuyers should not rush into a home purchase due to today’s record-low mortgage rates. However, mortgage rates can skyrocket. Rates are very volatile and will continue to be so in the coming weeks and months.
Housing inventory is low throughout the United States, except in higher-taxed states. Home prices are declining in states such as New York and Illinois, and home inventory is very high. This is because of high property taxes and other taxes.
If your financial situation and stability are strong, 2023 and 2024 are great years to purchase a home. Many new mortgage products have been launched in the market, such as Non-QM Loans and bank statement loans for self-employed borrowers. Asset-depletion mortgages and no-doc investment property loans have made a comeback for homebuyers.
