This Is Why Now May Be a Good Time to Buy a Home
To say that the U.S. economy is delivering mixed signals these days may be an understatement. On one hand, unemployment remains low, wages and incomes are rising, interest rates are slipping and home price increases are getting smaller. On the other hand, oil prices are higher, Brexit is a mess, the global economy is stuttering, trade battles continue and some economists worry that another (milder) recession is around the corner. Which set of signals should a prospective homebuyer pay more attention to?
Perhaps the best single metric to begin with is the mortgage interest rate on a 30-year, fixed-rate loan. Friday’s 30-year loan closed at 4.07%, according to Mortgage News Daily. That’s nearly a full percentage point below last year’s high of around 5.05% reached at the end of October. That one percentage point saves a borrower more than $175 a month in mortgage payments and around $65,000 over the 30-year term of a $300,000 loan.
Mortgage loan rates have reached their lowest level in over a year. Good news, indeed, but what about prices? The S&P CoreLogic Case-Shiller national home price index for January was published last week and showed a 4.3% year-over-year increase. That was two percentage points lower than the year-over-year increase in 2018.
But real estate, as we’ve all heard endlessly, is all about location, location, location. Home prices continue to rise well above the Case-Shiller average in some cities (Las Vegas, for example, rose 10.5% year over year) while posting only modest gains in others (San Diego, up 1.3% year over year). Of the 20 major metros in the Case-Shiller index, only five posted a month-over-month price increase.
With mortgage rates down and home prices increasing more slowly, what’s the inventory situation? Last week the U.S. Census Bureau reported that the inventory of homes for sale was up 13.3% compared to the year-ago level.
The combination of lower mortgage rates, slower price increases and rising inventory is good news for prospective buyers. Real-estate experts at Realtor.com offer some advice on how to hunt for a house in this market.
First, interest rates are typically tied to buyers’ credit scores, but don’t make the mistake of thinking another few months of polishing up that score will offset a possible rise in interest rates. The longer a buyer waits, the more the inventory declines too.
Second, after finding a house to make an offer on, get recent comparable sales, preferably no more than three months old. Once you have the recent comps, don’t make a lowball offer thinking the seller is willing to sell at any price. That is rarely the case.
Third, a quick decision may not be required in every market. A year or so ago, when sellers ruled, an above-asking-price offer was almost a requirement for buying a house. That is no longer true in most places, so prospective buyers can take a bit more time to consider whether the house is worth the money.
The 2019 spring buying season already has started and is shaping up to be a better year for buyers than any in the recent past. On your marks, …