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1. It’s cheaper buying than it is renting. A Trulia Trends study of the 100 largest metropolitan markets found that on average it’s 44 percent less expensive owning a house or condominium than it is renting. Remember, your landlord is in it to make a profit. He or she probably paid more for the apartment building than it’s worth today be he or she is charging every nickel he can squeeze out of it. Rents are going up and the forecast is for the trend to continue.
On the other hand, house prices are down significantly. On average, they dropped about 30% during the Great Recession. And while they are on the climb, they haven’t recovered nearly as much as they lost.
2. Mortgage rates are still low. While mortgage rates have risen during the second half of the year, they remain at attractive levels. But you don’t know how long they will remain there. The Federal Reserve has kept mortgage rates (and other interest rates) artificially low for years. However, recently they announced they are slowly backing out of that of that economic stimulus strategy. The days of low mortgage rates is coming to an end.
3. Home prices are rising. While they are low compared to the peek in 2007, home prices are on the rise. The amount of inventory on the market is shrinking and the law of supply and demand dictates that prices will continue rising. Builders are slowly getting back into the market but it will take at least a year for them to spool up to today’s rising demand for houses. The result will be rising prices.
4. Loans are becoming easier to qualify for. Tight lending requirements have been the biggest obstacle to financing a dream home. While still tight, large lenders are beginning to loosen up. Even if you’ve been turned down by the big lenders, try the community credit unions and smaller banks. They tend to be more lenient about home loans. Also, as a result of the tight lending environment, much more private money has come into the market. You can shop around for a realtor that has access to private loans.
5. House flippers are leaving the market. These are people that buy with all cash, make some improvements, and quickly sell for a big profit. When they make an offer for a house you are interested in it puts a big pressure on you to close the deal fast because their all cash offer can close in days instead of a month or two (even when your offer is for more). Rising prices in many markets are making these deals less attractive to flippers. Many are moving on to other markets or other ways to make a buck. That means less competition against your offer.
6. Avoid the coming rent increases. This is a big one. While it’s true that in many markets it’s significantly less expensive to buy than to rent, there are going to be some significant rent spikes in the very near future. That could ramp up the house buying market. It’s better to buy now than it is to put it off until rents start skyrocketing.
7. Invest in your future. The drop in home prices was an abnormality. Historically, home prices have constantly gone up. Previous corrections in home prices were a slowing of the appreciation rather than a drop in value. Buying allows you to grow your personal wealth. If you can pay the mortgage off before you retire, it will leave more discretionary money for you in your later years. Not having a rent or mortgage payment may even enable you to retire earlier.
Regardless which of these reasons or if all of these reasons appeal to you, buying today is an opportunity you’ll never see again in your lifetime.
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