LOVELAND – It seems that whether the real estate market is up or down, home buyers constantly wrestle with the decision of whether to buy now or later. Let’s face it, hindsight is always 20/20 and the future is always uncertain. If you knew a few years ago that the market would be this strong, you would have purchased a home then. Although there’s no way to know exactly what the market will be like next year, here are some considerations if you’re deciding whether to buy now or later.
Interest rate changes
Interest rates have risen over the last month. Industry experts have long predicted that it would, but only recently has the change been significant enough to get people’s attention. Indications are that it will only increase further through this year and into next year. So, if you’re waiting to buy, expect that you will pay even higher interest rates than we are seeing now. Also, keep in mind that as rates rise, the amount of house you can afford will fall.
Home price trends
Home prices have been rising steadily for years now. There’s no telling where it will be next year, but historically, here’s what we do know. When interest rates rise, home prices tend to level off. However, this it would take a significant rate increase to start affecting home prices, so you won’t see this change immediately. This process happens gradually over time.
Buy now or wait?
The process of interest rates increasing enough to impact home prices can take place slowly over several years. What should influence your home buying decisions now?
If you buy now, you can take advantage of interest rates that are still fairly low. This allows you to afford a more expensive home or simply pay less for a moderate home. If market prices continue to rise further, there’s an opportunity to gain equity quickly. Either way, you will start building equity right away and can take advantage of homeownership tax benefits.
If you wait to buy later, you are likely to get a higher interest rate. You will probably not afford the same price home that you can afford now. Since home prices take time to adjust, you may be paying more both in home price and interest rate. Additionally, you will have missed out on building equity during the additional time that you have been renting.
With all of this being said, we can’t cover this topic without mentioning that every buyer’s circumstances are different as is every market. The above is merely an overview of the market and some factors to consider when buying now versus later. This information should not be construed and legal or accounting advice. Be sure to consider your personal situation, finances, and real estate market and develop your own opinion as to whether it’s best for you, personally, to buy now or later.
Suzanne Plewes is a broker associate at RE/MAX Alliance. Write to 750 W. Eisenhower Blvd., Loveland, CO 80537, call 970.290.0373 or e-mail firstname.lastname@example.org.