Is Buying a House Now a Thrifty Move for Homebuyers? Let’s Find Out!

Jan 25,2018  Arrow Properties

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Undoubtedly, autumn is the season when the demand of starter homes commence to increase and reach its peak with a price of more than $700,000. According to various reports, the housing inventory gets a seven percent boost between mid-September and December in the US. But the best time to purchase your dream house is during winters.

It is because when January rolls around, the first-time buyers can find better deals from a buyer’s agent. Whether it’s a prime house, starter home, or some other category of home, the rates drop to their lowest prices in the fourth season of the year. Though this is the main intention, there are many other reasons that explain why purchasing a real-estate property in wintertime is a wise decision.

Interest rates fit in your pocket

One of the biggest reasons to acquire a land during the winter season is the rock-bottom interest rates. Freddie Mac’s recently conducted “Primary Mortgage Market Survey” demonstrates that interest rates for a 15, 20, and 30-year fixed mortgage are hovering just around 3 to 4 percent. But things will be changed by the end of 2018. There’s a prediction that mortgage rates will rise at least three times with an interest rate of 5-6 percent in the next 12 months.

For a quick understanding: Let’s say the total loan amount is $200,000 for a 15-year fixed mortgage. The Annual Percentage Rate (APR) on the same loan product is currently 3.875 percent, including your monthly taxes and other rates, which means the total interest you need to pay over the course of the loan would be $65,746.76 (180 monthly payments of $1,476.37, for a total sum of $265,746.76).

Now, if you decide to buy the same property by the end of this year or maybe the next year with a 6 percent APR, then the total interest you would pay to pay off the debt jumps to $103,788.46, a difference of $38,041.7.

It’s a huge figure, isn’t it? Securing a deal with a lower interest rate will definitely save you tens of thousands of dollars on your entire mortgage principal (loan amount plus total interest) and make monthly payments more affordable.

High demand, but low housing inventory

A crippling lack of inventory has been tormenting the U.S. housing market since 2016, constraining some purchasers to settle in the minute houses, while keeping others out of the ‘purchasing game’ completely. In fact, total housing inventory declined 13.4 percent during the past 12 months ending in October 2017. Many studies and analysis show that more than 967,500 homes were available for sale in the US by the end of November 2010, but the numbers have scaled down since then, and now there are only 653,362 homes left for sale. For most of the country, the fall of 2017 has brought favorable advantages to the sellers.

Allison Bethell, a real estate investment analyst, projected that inventory situation would remain the same during the second quarter of the year and new home constructions would take place subsequently. So, will this crisis finally get over in 2018? It’s possible; the general consensus is that inventory growth will happen marginally later this year and constructors will mainly focus on building more entry-level housing options. However, purchasers ought to be prepared for a market where they need to be aggressive to buy the property they want.

Sluggish but rising price growth

Certainly, home prices have climbed over the last few years. From January through September 2017, the rates have increased swiftly with a percentage of 5.5. This change is listed as the biggest gain since 2013 when the real estate market was finally recuperating from the bust. Experts have predicted that the red-hot markets this year will be the Southern states such as Texas and Florida, where new constructions are happening and economic momentum is continuing to chug along. Conversely, San Francisco can finally lose some steam in 2018. Prices will continue to increase, but the growth rate will slow down a bit.

To put it simply, many homeowners have already put their lands on the market since last summer or fall with a price intended to sell. That’s the reason they’ll be eager to trade during winters, even if that means accepting a lower price, helping buyers secure a great deal fitting their budget and needs.

Remember, if you intend to purchase a property with a fixed rate mortgage, then a major portion of your payment stays constant for a period of 15 or 30 years. So, find a reliable buyer agent in Rancho Cucamonga who will help you get an appropriate price and best loan terms on your home mortgage loan.

The Bottom Line

The Mortgage Bankers Association (MBA), Fannie Mae, Freddie Mac, and the National Association of Realtors (NAR) are in unison, anticipating that rates will increase again in fall.The mortgage rates are determined after analyzing the movement of 10-Year Yield of US Generic Government.

Typically, when bond yield goes up, interest rates also go up, and vice versa. According to the treasury and real interest rate, financing costs were hitting 12.57 to 14.59 percent during the housing boom in 1981 and were around 7 percent during the market downturn in 1991. The 10-year treasury rate and bond value are benchmarked between 3 to 4 percent this year, which is why prices are flat to slightly low right now.

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