These are interesting times for everyone. Speculation about a recession, rise in mortgage interest rates, and low inventory of homes for sale are interesting indeed. And for the person thinking about buying a home, it becomes complicated. There are many factors that will indicate when it’s a good time to buy a home. It all boils down to your particular set of circumstances. So for you, is this a good time to buy a home?
MORTGAGE INTEREST RATES
At the end of 2022, mortgage interest rates rose sharply from under 3% to over 7% at the beginning of 2023. This caused rapid home sales as many buyers could no longer afford to buy a home. Those who didn’t qualify did not want to pay higher rates. According to this article by NerdWalet, “Rates could go up again if the Fed delivers more rate hikes in 2023. The Federal Open Market Committee will next meet Jan. 31-Feb. 1”. Still, most experts expect that rates will eventually go down to around 4% by the end of the year. “we can expect these rates to go back down if the Fed is successful in using them to lower inflation”, according to Forbes.
For someone thinking about it, 2023 may be a good time to buy a home. There is less competition than last year and the ability to keep property inspections and negotiate is present. This is a big change from last year when home sellers had multiple offers. This increased home prices dramatically and forced serious buyers to waive contingencies such as home inspections. Now, there is less of a chance of getting into bidding wars with several other interested buyers for the same house. This allows for negotiations and price adjustments. It helps that homes are taking longer to go under contract so buyers have time to see a home before it goes quickly under contract. Additionally, home prices have leveled off (for the meantime).
FUTURE OF HOME PRICES
The Federal Reserve is taking measures to curb inflation and bring down the cost of goods and services. Home prices are included. So far, home prices have leveled off. The expectation is that they will go down in certain areas. In Northern Virginia, home prices are still about 3% higher than they were last year but are going down month over month. It is possible that they will continue to decline in the coming months and this is a favorable position for buyers. There is a floor on how low prices will go, however. Since there are limited homes to buy, they are not expected to go down dramatically.
Many buyers active in this current market understand that they may be locking in higher mortgage interest rate but home prices are more reasonable. They can always look into home financing options such as first-time home buyer programs, buying down interest rate points, and 2-1 buydowns. Also, if mortgage rates do go down later in the year or next, they can refinance their mortgage at the lower rate.
LOW BUT INCREASING INVENTORY
The number of homes for sale is still in low supply while demand for homes remain high. Still, the Spring market is almost here and inventory is going up. This is great news for buyers who now have more of a selection and can possibly find their dream home and not have to compete with many buyers.
This is a great time to look for and buy the home you want. The key is understanding if you can afford a home. And if not, what steps can you take to be in a position to buy a home sooner rather than later. The National Association of Realtors, in 2021, reported that home owners have 40 times more net worth than the typical renter. Enough said!
Home inspections are a crucial component of the home selling process. Regardless of what happens, having an experience real estate specialist representing your interests is what you need.
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