On the move: Home ownership today

3 MIN READ | #blog

There are dozens of reasons why you may be thinking of moving.  Maybe you’re downsizing in retirement, are being relocated for work, or are growing your family and need more space. Whatever the reason, it’s estimated that 9.8% of Americans move annually.1 But now may not be the best time to buy a new house if you don’t have to.

Cost of buying and interest rates

Mortgage rates have been surging since their pandemic lows in 2021 and recently those rates aren’t just rising but seesawing from month to month.2 As the Federal Reserve raises interest rates to try and tamp down inflation, home buyers are feeling the pinch. The average monthly cost of a typical mortgage jumped by about $1,000 since last year.3

But it’s not all bad news, as mortgage rates rise quickly, experts are predicting that home prices will decline. Some are going so far as to say that the upcoming period of falling home prices will be the second-sharpest home price decline since the Great Depression.4 For people who feel as though they have been priced out of the market, a drop in real estate averages can be just what they need right now to be able to capture their dream home. But many experts also believe that any upcoming housing market crash would not match the severity of what we saw in 2008 because there is not an extreme surplus of housing supply today like there was back then.5

To buy or not to buy

With the rise in interest rates, many people are asking themselves if they should buy a new house now or if they should wait for home prices to keep dropping and/or mortgage rates to stop rising. 73% of consumers report it is a “bad time to buy,” according to Fannie Mae’s most recent National Housing Survey.6 However, if you’re thinking of waiting for home prices to drop, remember that even though that’s what is predicted to happen, it may not come to fruition. And if home prices do start to fall, it’s impossible to predict exactly when they will hit bottom, so if you wait too long, prices could start climbing again.

Another aspect to consider is that potential sellers may be willing to “wait it out” rather than sell at the bottom of the market. Homeowners are often reluctant to accept reductions in their home’s value unless they absolutely must. Add in the fact that 92% of current homeowners have mortgages with rates below 5%, and you have a recipe for low housing inventory plus fluctuating interest rates for potential buyers.7 This could cause home competition to heat up, with less supply there will be higher demand, which means the benefit of falling prices could be negated by a competitive market with offers above the asking price.

Everyone’s situation is unique and the decision to buy now or wait may be influenced by several factors. But your financial situation should always be one of those factors.

If you’re looking to buy now, having an excellent credit score can help you get the lowest possible mortgage rates that lenders are currently offering. Now could be a good time to buy if you have expendable savings, separate from your retirement and emergency funds, that can be used for your down payment.  With closing costs running between 2 and 6 percent, if you are planning on purchasing your “forever home”, it will justify those large one-time costs.8

Benefits of home ownership

Home ownership is also about your space, your rules. You can remodel, expand, or make your space pet friendly. Owning a home is considered the American Dream for a reason: it is yours, and you can make it yours in every way imaginable.

But Home ownership is not just about having a place you can truly make your own. You can build home equity that can be borrowed against for the right needs, get tax deductions, and improve your credit history through timely mortgage payments.

There is a lot to consider before purchasing a home — especially during the most volatile mortgage rates in decades. It’s important to keep your personal circumstances in mind, weigh your options and make an educated decision that is in your best interest. A financial professional can help you in this process and help create a clearer picture of your situation.

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1 “What Moved America: 2021 Moving Industry Statistics You Should Know.” Shyft.com, January 19, 2022

2 “Homebuyers are grappling with the most volatile mortgage rates in over three decades” Redfin, September 28, 2022

3 Weisenthal, Joe, ”Here’s how much less house you can buy thanks to the Mortgage Spike.” Bloomberg, September 28,2022

4 Lambert, Lance ”Wall Street: U.S. housing market to see the second-biggest home price decline since the Great Depression.” Fortune, October 3, 2022

5 Stroezewski, Zoe “The ‘criticial difference’ between housing market now and 2008 crash: Expert” Newsweek, August 9, 2022

6 “High home prices, mortgage rates weighing on housing sentiment,” Fannie Mae, September 7, 2022

7 Lewis, Holden ”Home prices might drop but won’t crash: What buyers should know.” Nerdwallet, September 27, 2022

8 McMillin, David, ”Should I buy a house now, or wait?” Bankrate, September 26, 2022