Taking the leap from renting to becoming a home owner, for many, is a difficult decision fraught with much worry, self-doubt, and thoughts of the unknown. For those out there thinking about buying their second or third homes, this decision is fraught with much of the same emotions, but to a lesser degree. If you are thinking about purchasing a home right now, you are most certainly getting a lot of advice. Even though your friends and family have your best interests at heart, they may not be fully aware of your wants, your needs, and what is currently happening in the wide world of real estate. In order to tell whether or not now is actually a good time to buy, there are three questions to ask before buying:
Why am I buying a home I the first place?
This is by far the most important question you need to answer. Forget about worrying about finances for the moment. What originally brought you to the idea of home ownership? Why did you originally want to buy a home? For many, the reason has zero to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the 4 major reasons people by a home have nothing to do with money:
- A good place to raise children with good schools.
- More space for your family.
What benefits will you and your family derive from owning a home (non-financial, of course)? That answer should be your driving force behind owning a home.
Where are home values headed?
When looking at future housing values, the Home Price Expectation Survey provides a fair assessment. Every quarter Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts, and investment/market strategists about where prices are headed over the next 5 years. Here is what those experts projected in the latest survey:
- Home values will appreciate by 4% in 2015.
- The cumulative appreciation will be 23.5% by 2019 (even the most bearish quartile of the survey are still projecting a cumulative appreciation by over 15.1% by 2019).
Where are mortgage interest rates headed?
The other biggest concern, financially, when buying a home concerns the direction of the mortgage interest rates. The “long term cost” of a home can be dramatically impacted by an increase in mortgages rates. The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), Fannie Mae, and Freddie Mac have all projected that mortgage interest rates will increase approximately 1% over the next 12 months. With interest rates set to climb, home values continuing their ascent, and the long term cost of living rising by the month, now might very well be the right time to buy.
Only you and your family can know for certain the right time to purchase a home. Perhaps you need to wait until some things are made easier (financially or personally). Perhaps you will not find the time to be right for some time to come. However, answering these 3 questions will help you discover the right time as it arrives.