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Despite Mortgage Rates, You Should Buy a House Right Now

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You can’t time the housing market.

While this claim may seem false at first glance, over 50 years of sales data broadly suggest that now is always the right time to buy a home. Of course, home prices vary by market, but at the national level he’s been rising steadily since the 1960s, according to data from the St. Louis branch of the Federal Reserve.

mortgage interest rateInterest rates, which have basically doubled from 2.9% a year ago to 5.89% as of Sept. 8, are a factor, but waiting for rates to come down is a dangerous game. Lower mortgage rates could encourage more people to return to the housing market. that will drive the price up.

A home is almost always not an option purchase. Unless someone offers you a place to live for free, your choice is to rent or buy a home, and as home prices rise, rents generally move in the same direction.

“Median rents in the top 50 metropolitan markets hit a record $1,849 in May, up 15.5% year-on-year. According to Realtor.com, a real estate service company. was number 15th We hit record rents for a month in a row.” Dan Weil of TheStreet wrote in July.

Simply put, if you need a place to live and expect to stay there for at least a few years, buying makes more sense than renting.

house prices rise

As you can see from the graph above, house prices are steadily rising. Yes, there are times of decline and individual markets may vary, but historically the right time to buy a home has generally always been “now.”

Mortgage interest rates are a factor, but they are also relative. Current rate hikes have slowed, if not stopped, inflation in many markets. Even a few years from now, if we see interest rates falling, that will trigger prices to rise again. And after interest rates fall again, you can always refinance with a higher interest rate and pay less on your mortgage.

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It is important to understand the impact of mortgage interest rates on potential payments. If you borrow $300,000, here are the monthly payments at various interest rates:

  • 3%: $1,265
  • 4%: $1,432
  • 5%: $1,610
  • 6%: $1,798
  • 7%: $1,996

That’s the difference between the rate a year ago and the current rate (more or less) of $435 per month. Extra costs certainly take into account how much you can afford to spend on a home, but that doesn’t mean you shouldn’t buy a home in general.

A Personal Perspective When Buying a Home

During the pandemic my wife and I sold our downtown condo and used the proceeds to buy a resort condo/rental property and move into the rental. When we moved into the rental – forced to move due to having to stay on my son’s bus lines for the last year and a half of high school – we rented a 2,600 square foot 4 bedroom for $2,495 a month. Community townhouse with nice pool and gym.

That number was about the same as the cost of a condo I had owned before, but I never built the property or gained a valuation. I started looking.

Ultimately, we decided we couldn’t afford what we wanted (a three-bedroom detached house) in the South Florida area we lived in, so we started looking about 40 minutes north. I was. In the end, we found a nice community home with similar amenities to the one we had left and purchased a 3 bedroom single family home for $315,000 for $315,000.

It’s a little smaller in size, but I didn’t need as much space as I would in a rental. Our mortgage is making monthly payments at about 4% before interest rates spike. This includes a homeowners association fee of about $400 and insurance and tax escrow of about $2,100 a month.

That’s $600 less per month than I was paying for not owning the house ($1,900 less per month than what my previous landlord got from his next tenant). If he had waited a few months and paid 6% interest, his payments would have increased by $330 a month (and as the price continued to climb, so would the cost of purchase).

So now, instead of renting a place where the cost will almost certainly rise from year to year, we are building our property on real estate in the community where the price is likely to rise. Of course, we face additional costs such as repairs and improvements (the whole house was redone), but we own the home and it gives us assets that build wealth over time. .

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