Is 2017 A Good Time To Buy A Home?

The following article originally appeared on Unison.com. 

While mortgage interest rates are still relatively low, we’ve already seen indications that they could increase during the remainder of 2017 or in 2018. At the same time, home prices are shooting up in many major markets.

Coastal markets have seen some of the biggest spikes in home prices recently. Boston experienced a 11% increase in the last 12 months, for example, while Seattle saw a 15% increase over the last year.

Whether or not 2017 is a good time to buy will largely depend on the market you want to get into. Where home prices are stable, buying now before interest rates rise further could make sense. In other areas, where prices have already raced upward, it could make sense to wait out the rush and look for more of a buyer’s market. It depends on your preferences and your situation.

It goes without saying that no one can predict the housing market and the advice here is only intended for educational purposes.

Interest Rates Remain Low, Keeping Homes Affordable

You may feel like you missed your chance to buy into the market for a low list price. The economy recovered since the recession, and the housing marketing has rebounded along with it.

See how a home ownership investment can double your down payment. 

It’s true that home prices are generally higher than they were 5 years ago, but in many places the average home remains affordable for the average homebuyer. Why? Well, it’s partly because interest rates remain low.

Even with the Federal Reserve increasing rates twice this year, rates for a 30-year fixed-rate mortgage still hover around 4%.

The low rates keep buying a home a realistic option for many, even as the housing market booms and prices go up. That becomes even more true for those looking to move away from coastal cities to places where real estate prices are rising at a slower pace.

That being said, the trend of higher home prices — especially in cities along both coasts — looks likely to continue. At the same time, interest rates will likely rise.

Should You Buy This Year?

No one can accurately predict exactly when interest rates will start climbing, making mortgages more expensive and putting homes further out of reach for some people. You shouldn’t feel like you need to panic and rush into buying.

But if you’re prepared, have your down payment secured, and want to buy, 2017 might be the time to jump in the market, especially if you’re looking to buy in an expensive location.

Rising interest rates have more of an impact on pricier homes. The more expensive your home, the more you likely need to borrow — and that means a bigger balance to pay interest on.

Discover how a home ownership investment makes it easier to buy a home. 

Here’s where it gets tricky: that down payment you may need in order to buy is a big amount to have in cash. Lenders like to see a 20% down payment. Waiting until you have that much saved might mean missing out on a great opportunity to buy before homes become too expensive.

You have a few options:

• Reduce your price range. Look for lower-priced homes, which will allow you to put less down when you take out a mortgage.
• Put less than 20% down. You can go with a FHA loan or VA loan, if you’re eligible. Or you can use a piggyback mortgage (but watch out for these).
• Use a home ownership investment program like the Unison HomeBuyer program. You can use 10% of your own cash, receive 10% from Unison as an investment, and go to the lender with a full 20% down payment. Because the money from Unison is an investment in your home, it’s not debt and you don’t pay monthly payments or interest charges to Unison.

You could also consider getting an adjustable-rate mortgage and locking in a low rate for the initial term of 5, 7, or 10 years, but this is a risky option because after that initial term your interest rate adjusts annually and it can skyrocket.

The Market Will Likely Balance Out, One Way or Another

Here’s another caveat if you’re worried about when to buy: as interest rates rise and homes become more expensive, the pool of potential buyers will thin out. That means the current market, heavily favoring sellers, could start to shift in buyers’ favor.

When fewer people buy, there can be more supply than demand in the market. That will help drive home prices back down, which can help balance rising interest rates in terms of affordability for you.

So if 2017 isn’t your year, that’s okay! Plan to buy in the next few years. That gives you a chance to save more money for a down payment — and it can give you a better opportunity via a market that favors buyers more than sellers.