1. Interest Rates Are Still Low
A 30-year-fixed-rate loan now averages 4%, according to Freddie Mac, but many economists believe we will see 5% rates this year. As interest rates increase, so do your monthly payments.
A $500,000 house at 4% with 20% down would have a monthly payment of $2,387. With a 5% interest rate, that payment increases to $2,684.
2. There’s More Inventory
As more houses enter the for sale market, prices stabilize. The upside is consumers now have more choices, if they are looking at existing homes.
New homes are another story: New construction has more than doubled its current production to meet market demand.
3. Home Prices Are Going Up
The median price of an existing home has risen 10-15% in the local area just since last year.
4. Rents Are Sky-High
If you live in a big city, then you know rent is astronomical. In San Francisco, many people are spending 42% of their monthly income to pay the rent. Nationwide, rents are rising at a 4% annual clip.
Buying a home would lock in your monthly payment and stabilize your finances with a fixed-rate mortgage.
(If you’re renting and never thought you could afford to buy a house, try a Rent vs. Buy calculator to see what’s possible.)
5. Employment on the Rise
Perhaps nothing is as important to the financial stability you need to buy a home as steady employment. The U.S. economy is finally adding jobs—about 200,000 new jobs per month.
The next generation of home buyers—the millennials—has been particularly affected by the nation’s job slump. Saddled with student loans and tight lending restrictions, many in this generation have been living with their parents to save money until the economy picks up.
If your employment prospects look good these days and the other four factors check out, then it may indeed be the right time for you to buy a home of your own.