2021 – A Good Year to Buy a Home
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Now that 2020 is behind us, it’s time to take a look at what’s in store for homebuyers this year. Is 2021 a good year to buy a home? If you’re thinking about it, there are some things to consider but my answer to that question is a resounding YES! Here are a few trends to keep an eye on as you begin your home search.
Interest Rates are Still Low
Average mortgage interest rates are still at historic lows and despite some economic rumblings, it does not seem like the Federal Reserve will raise rates anytime soon. Even if rates rise a bit over the next few months, the Mortgage Bankers Association expects rates to stay in the 3.5% range this year, which is darn good for buyers. A low interest rate means a buyer can qualify for a larger loan amount with a lower monthly payment. Most borrowers decide on a 30-year mortgage but if you have the means to reduce that to a 15-year loan, you can save on interest payments over the term of your loan.
Inventory is Low
This is a challenge for buyers in most parts of the country. The inventory of homes available to purchase is at an all-time low. There are just not enough homes listed for sale to meet the demand. That has been the case for a while now, and many potential sellers decided against listing their property during the pandemic. But if you are persistent and willing to compromise, it’s likely you can find a great home. Can you cast a wider net and search in surrounding communities, not just your target neighborhood? Can you re-evaluate what features are must-haves versus nice-to-haves, and tour homes offering fewer amenities or in need of repairs?
Home Prices are Rising
If you’re already looking for a home you know prices continue to rise. In 2020, the national median home price rose 14% from the previous year, and most experts predict that trend will continue this year. It’s important to be realistic about how much house you can afford. The rule of thumb is that your monthly housing expense should not exceed 28% of your monthly gross income. There are mortgage programs that allow a higher percentage of your monthly income for housing expenses, but it’s wise not to get caught up in a competitive market only to find out you didn’t factor in other costs associated with homeownership such as furnishings and ongoing maintenance.
Builders are Seeing Increased Volume
It’s the general consensus that builders will be very busy in 2021. Construction of new homes has been rising steadily over the past decade, but builders still face hurdles including higher prices for materials and a skilled labor shortage. Like the resale market, there have been issues keeping up with demand and there is not enough available inventory. If you’re thinking about building, it pays to be patient and explore your options.
Whether you plan to buy a home in 2021 or beyond, your first step is to work with a Hamilton Loan Advisor to get pre-approved for a mortgage. Realtors and sellers will want to know that you’re a serious buyer who is able to obtain financing. Owning a home is still one of the best ways to build future wealth so all things considered, this is a great year to take that step and become a homeowner!