New Year’s Resolution
Here’s a New Year’s resolution: buy a home early in 2017.
Not everything ended on a negative note in 2016: we’re overall in better economic shape than in recent years, unemployment is down to 4.6%, the lowest since 2007, consumer confidence is up, and housing values have recovered in the majority of major markets in the country.
With all of that as a backdrop, 2017 sounds like a great time to buy a home, right? Maybe. There are two factors that make the start of 2017 worse for home buying than the end of 2016: inventory is down, and interest rates, which translate to mortgage rates, are up.
Mortgage rates are up on average a half to three quarters of a percentage point than they were a year ago. That translates into payments that are around 3-4% higher. That sounds manageable, however, the Fed is expected to increase rates again this year, meaning mortgage rates, and monthly payments, will only continue to rise.
We were already seeing tightening inventory as 2016 trudged on. In fact, supply constraint has been an issue for years now. The age of inventory (how long homes sit on the market) has ped dramatically as new homes seem to get snatched up before they have even hit the MLS. We can’t tell you how many of our clients have been in a multiple offers situation and have been beaten out by offers that are sky high.
Add to the mix a burgeoning demand due in part to a group of buyers who will be coming back online this year. Those who lost their homes in the recession and declared bankruptcy have waited the seven years for their records to be clear, and are going to be looking to invest in a home again. This has resulted in an unusually strong demand in what is normally a slower time of year, with fewer homes on the market than we had at this point last year.
Our consensus: get started on your home search now. If 2017 is your year, we recommend you get started now. Inventory at this time of year is historically only marginally less than in the spring, but there is considerably less competition out there from other buyers. Nobody likes slogging about in the snow to look at a potential back yard, but lace up your boots and get out there before the snow melts. Also, since mortgage rates are likely to move up, the sooner you close on a house the sooner you can lock in rates before they get even higher.
Further questions? Don’t hesitate to contact us!